Have you been wondering if your current car or truck loan has outlived its usefulness? Maybe you purchased your ride a few years back, when your credit wasn’t too great. Or maybe you can afford larger payments now after snagging that big promotion. Whatever the reason, millions of people every year contact lenders with questions about getting new loans on the vehicles they already drive. According to supermoney.com, it’s called refinancing and it’s a smart way to reduce monthly expenses, get a more favorable interest rate, or simply adjust the agreement’s terms to reflect your better monetary position, higher pay rate, or improved credit score. What do consumers ask most often? Here are some of the question’s lenders get when they pick up their phones or open their email boxes.
1. Why Should I Do This? I’ve Heard it’s a Good Idea.
There are dozens of reasons based on personal preference and changing economic conditions, but four are most prevalent:
- Rate Drop: When overall interest rates drop in the economy, you might be stuck with one that’s too high. By refinancing, you have the chance to take advantage of those new rates because you are essentially entering into a new contract.
- Payment Help: For whatever reason, your payments might seem too high. Perhaps you’ve just become a parent, taken a pay cut at work, or moved into your first home and need room in the monthly budget. If your payment is too much for you to handle, a lower one for a longer term (and perhaps at a lower rate) can make a huge difference in your lifestyle and bring peace of mind.
- You Were Marked Up: Some auto dealers mark customers’ loans up at the time of purchase for various reasons. If you were the victim of a mark-up, it can be a wise move to rework the agreement and put a fairer rate in place.
- Your Credit is Better: For the majority of working adults, creditworthiness improves as they age, especially from their early twenties up through their forties. If your scores have risen in the last couple years, it could be a game-changer in terms of what kind of financing you could get with a fresh loan.
2. How Can the Process Save Me Money?
The essential concept of a vehicle refi is that you’re getting a brand-new loan, from a different lender, and with different conditions. If you work with a top lender from WithClutch it’s possible to cut monthly payments, extend the payment period, and get a more favorable interest rate. Any or all of those things can save you big bucks in the long-term. Lower payments have the effect of reducing your monthly expenses right now, however, which is why most people opt for this smart way of dealing with their vehicle financing. Try using one of the online calculators to see exactly how the strategy can work for you.
3. Will I Qualify for a More Favorable Interest Rate?
There are multiple factors at work in any refi. The main one is your credit. If it’s good, you’ll likely be able to move forward without any delay at all. Check to see whether you’ve made the last dozen payments in full and on time. If that’s the case, your chances of qualifying are excellent. If those recent payments caused your scores to go up, and they probably have, then you also are a solid candidate for a lower rate. That means all your payments from here on out will be based on a better rate and could be significantly lower.
4. How Do I Find the Best Lender for My Particular Situation?
It pays to take time and make an effort to find the best lender. Check around on Nerd Wallet and see what your options are based on your credit scores and current income. If those two factors are positive, then it will open up a lot of possibilities and allow you to work with more lenders. After you identify some of the better financing sources, be sure to compare several offers and see what kind of rates and overall terms you can get. Don’t be concerned about hard pulls on your credit file because when lenders run a check on you, they typically only do a soft one. Spend at least a couple hours checking the details of offers you receive. They’ll probably all be a little different. Find the one that’s right for you and contact the institution or company for more information.
5. What is the Advantage of a Longer Term?
Say you’re currently in the middle of a 5-year agreement, which means 60 monthly payments with 30 left to go until you’re done. If the payment amount is too high for your current monthly budget, a term extension could be the answer. Even with no other changes, adding 10 or more months to the contract would give you breathing room by spreading out the total remaining balance over additional months. Many people opt for refinancing for this reason alone but are surprised to find that they can get better interest rates as well.
6. Is it Possible to Refinance Trucks and Motorcycles Too?
Yes. It doesn’t matter whether you have a sedan, a pickup, or a motorcycle. As long as you borrowed and entered into a formal financial agreement at the time of purchase, then it is subject to being refinanced. The smartest way to proceed is to speak with someone who will be handling your new contract. Some will even help you get a new agreement on a boat, so just be sure to ask before you do all your comparisons of rates, terms, and other conditions.
7. How Long Does the Process Take, Start to Finish?
It depends who you work with and what your situation is, but in general, a typical refi takes less than an hour if you have all your information ready to go and are willing to answer questions or provide additional documents. Don’t be surprised if you’re all done much faster than you thought.