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Requirements to refinance your car loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive tools and financial calculators, publishing original and objective content. We also allow users to conduct research and compare data for free to help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website are provided by companies that compensate us. This compensation could affect how and when products appear on this site, including, for example, the order in which they may be displayed within the listing categories and other categories, unless prohibited by law. This applies to our mortgage, home equity and other home loan products. But this compensation does have no impact on the information we provide, or the reviews that you see on this site. We do not include the universe of companies or financial deals that could be available to you. MoMo Productions/Getty Images
5 min read Published November 16, 2022
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Written by Bankrate Written by The article was created with the help of automation technology, and then verified and edited by an editor from our editorial team. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the beginning of 2021. They are dedicated to helping readers gain the confidence to control their finances. They provide precise, well-studied information that breaks down otherwise complex subjects into bite-sized pieces. Written by Mark Kantrowtiz and reviewed by Nationally recognized expert on student financial aid Mark Kantrowitz is an expert on student financial aid, the FAFSA and 529 plans, scholarships educational tax benefits, and student loans. The Bankrate guarantee
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There are money-related questions. Bankrate has the answers. Our experts have helped you understand your money for over four years. We continually strive to provide our readers with the professional advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict standard of conduct, which means that you can trust that our content is honest and reliable. Our award-winning editors and journalists create honest and accurate content that will help you make the best financial choices. The content we create by our editorial team is objective, truthful and uninfluenced through our sponsors. We’re open about how we are capable of bringing high-quality content, competitive rates, and useful tools to you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods or services, or through you clicking specific links that are posted on our website. This compensation could impact how, where and when products are listed, except where prohibited by law. We also offer mortgage, home equity and other products for home loans. Other elements, such as our own website rules and whether a product is available within your region or within your own personal credit score can also impact the way and place products are listed on this site. While we strive to provide an array of offers, Bankrate does not include specific information on every credit or financial product or service. Refinancing your vehicle loan often depends on the savings you’ll make in the long run, whether in a month-to-month or overall. Before you sign off on a new loan you should ensure that your car and you meet the criteria. Though requirements vary among lenders, keep in mind the ones listed below. Requirements for taking out an loan in order to finance your car Consider these aspects when you are considering your auto loan. The remaining time on the loan The amount of time left for the loan is a common eligibility requirement. In general, lenders want that you are current on your loan payments, have paid at least six months of your loan in addition to having at least 6 months left. This will allow the lender to determine if you have a track record of making payments, or still have enough to profit off interest when you’re done paying off. If you’ve taken out a 60-month auto loan and are just three months into making payments then you’re likely to not be eligible to refinance the loan for another couple of months. If you’ve already paid 54 times already and are in the process of paying them off, you’ll likely need to finish paying the loan off, rather than refinancing it. Rest of the amount loan amounts vary by lender and lender, but you can anticipate that you will need between around $3,000 to $5,000 remaining from your loan. Since refinancing is essentially the process of taking out a new loan lender, they don’t want to give small amounts since they won’t be able to get as much profit from the loan. And if you bought an expensive vehicle, you may be unable to refinance immediately. Refinancing autos with loans for over $50,000 can be a problem. Mileage and model year If you bought a heavily used vehicle and wish to refinance the loan — or you’ve already accumulated a number of miles — you might not be eligible to. Most lenders will have a cap of 100,000-150,000 miles. While lenders don’t have an age limit but you might not qualify even if you own an older car. In general, lenders establish the minimum age at 10 years old. Some lenders will require a vehicle that is less than eight years old to be able to refinance the loan. Credit score As with every loan you will be a major aspect. Refinancing can be a great option if you’ve got low interest rates on your car loan and have since raised your credit score. Anything less than 600 is unlikely to bring you a lower rate and could , especially in the event that you lengthen the loan duration to lower the monthly payment. It’s free to apply online. If it’s not where you want it to be, think about working on it prior to applying for refinancing. Debt-to-income ratio requirements Your debt-to-income ratio measures your debt against your income. It is typically expressed as a percentage. The acceptable range is different between lender to lender but typically is not more than 50. Repaying your debts is the simplest method to reduce your DTI in the event that the lender finds it to be too high. Lowering the amount of other installment loans or credit card charges could help show that you are financially responsible to a new lender. You might want to use a tool to determine your DTI. This way, you’ll know the amount of debt you’ll have to settle before applying. Refinancing your car loan Refinancing a vehicle loan is fairly simple. It is the same process as getting a new car loan. Here are to help streamline the process: Look around for the best loan. Make an application with at least three lenders, just as you would for taking out a new auto loan. Make an application to the loan. Complete all the information requested -about your identity, employment as well as your current loan and car and then provide the necessary documentation. Receive your loan funds. The lender will send you the money or pay your current lender directly. This can take between a couple of days and several weeks, therefore keep on making your payments. You can begin paying off your loan. Once your loan is fully funded, it is time to begin paying it back. Pay your bills on time and then send them to the right lender. Learn how to best use your savings. Once you’ve repaid your new loan, you can use the money to boost your financial situation. You might consider putting the money towards a , debt repayment or . Pros and cons of refinancing your car loan Before you refinance, weigh the . Pros You may secure a lower interest rate. It is possible that the lender is able to refinance your loan may provide you with a lower rate cost, thereby reducing the amount you pay over your loan’s life. A lower rate is more likely when your credit score is improving or you have financed your loan through a dealer. Your monthly payment may be decreased. Extending your term or lowering the interest rate could lower your monthly payments. Be careful, though. The extension of the auto loan time frame will also result in additional interest. Cons Your interest rate could increase. If you don’t qualify for a lower rate, consider improving your credit score prior to applying. You may extend the life of your loan as well as the amount of interest you have to pay. Even if your interest rate will be lower than the one you currently have, you can nonetheless increase the amount interest you pay when you decide to extend your loan time. The longer it takes to repay your car and the higher interest rate you’ll accumulate. You may end up upside-down on your loan. In the event that you decide to extend your loan term when refinancing, the amount you owe may exceed the vehicle’s value as a result of depreciation. This is referred to as being upside down in your loan and could make it difficult for you to sell or refinance your vehicle without losses. Things to think about prior to refinancing your car loan There are some crucial questions to be asked before you decide to refinance your car loan. Are your current interest rates affordable? If you’re paying a competitive interest rate, then you’ll need to check rates to determine if you’re getting a loan is worth it. In the last few months, the Federal Reserve increased the multiple sessions in a row, which may mean auto loan rates increase over the next few years. Bankrate tip
You must compare rates with several lenders to see which will offer you the best price. Use a to compare your potential monthly payments and total interest with your current loan.
What is your current vehicle worth? If you are considering refinancing your vehicle loan it is important to know your ratio of loan-to-value. This ratio will tell you how much you owe. If you’re near paying more for your car than it’s worth, you may want to refinance for a shorter term. What are the terms that apply to the loan? You should know some of the fundamental information about your current loan in the event of refinancing. These include the loan’ APR, length, the time left and the monthly installment. Also, you can look through your loan documents for more details on late charges and . Next steps Refinancing your car loan could be a good choice, however, it is important to take a few steps to plan ahead for this process. Consider your current credit score, your car’s mileage and age, the amount you owe on your car and the ability to pay for the new loan. Depending on your financial situation you might want to consider asking the possibility of making your auto loan payment less expensive. Find out more
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The article was written by produced using automated technology, and was thoroughly checked for accuracy and quality by an editor on our editorial team. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to control their finances with precise, well-researched and well-researched information that breaks down complicated subjects into bite-sized pieces.
Auto loans editor
Reviewed by Mark Kantrowtiz Reviewed by Nationally acknowledged expert on student financial aid Mark Kantrowitz is an expert on student financial aid, the FAFSA, 529 plans, scholarships as well as tax benefits for education and student loans.
Nationally anerkannt student financial aid expert
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