Refinance is a process that involves replacing one or more loans with a new one. It’s typically done through a different lender, and various factors such as your credit score and current interest rates are taken into account. If you’re thinking about refinancing or have received an offer to do so, here are some things to keep in mind.
When Should You Refinance Your Car?
The best time to refinance a car loan is when it can help you save money in the long run and lower your monthly payments. However, it can also help if you’re hoping to break free from your payments or the interest rates on car loans have decreased since you bought your vehicle.
1. Your Credit Score Improved
Even if the market hasn’t changed, your credit score can still help you get a lower rate. This is because if you’ve improved your credit score since you signed on for your first car loan, you can qualify for better terms.
2. Your Initial Loan Was From the Dealership
Getting your loan from the dealer usually comes with higher interest rates than from a credit union or bank. If you took out your loan through dealer-arranged financing, you can get a lower rate by refinancing with a different lender.
3. You Want Lower Monthly Payments
If you’re looking to lower your monthly payments, a car loan refinance can be a great way to do so. It can help you get a lower interest rate and lower your monthly payments. However, keep in mind that this strategy can also increase your payments over the long run if you shorten the length of your loan term.
If you want to know how long does it take to refinance a car, the amount of time it takes depends on the lender. In some cases, the refinance may be approved the same day you apply. In other cases, it can take a couple of weeks for the application and approval to go through. According to Lantern by SoFi, “When you refinance a loan, you are replacing your old car loan with a new one. Ideally, the new loan will have better terms and/or a lower interest rate, helping you improve your financial circumstances.”
Tips When Refinancing
Aside from timing, various factors can affect the length of time it takes to get approval for a car loan to refinance.
1. Shop Around
Before you apply with a particular bank or credit union, make sure that you compare the terms and interest rates offered by multiple lenders. Doing so will allow you to get the best deal.
2. Consider the Fees
Before you start looking into the details of a car loan refinance, make sure that you consider the fees that will affect your overall savings. Some loans have a pre-payment penalty, which means that you’ll have to pay the original lender when the new loan comes due.
3. Understand the Credit Implications
Opening a new account after getting approved for credit can help lower your credit score. Although it’s important to have a good payment history, making timely payments on a new loan will boost your credit score over time.
One of the main reasons why people consider refinancing is to lower their monthly payments and get a lower interest rate. Doing this can help you save money in the long run.
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