Refinancing a car loan involves several steps:
- Review Your Existing Auto Loan: Find the contract for your current auto loan and gather the following information:
- Amount of your current monthly payment.
- APR for your current loan.
- Number of months left to repay your current loan.
- Amount to pay off your existing loan.
- Determine the Value of Your Car: It’s important to know the current value of your car. If you owe more than your car is worth, you most likely can’t refinance until you get into a positive equity position.
- Check Your Credit: Lenders rely heavily on your credit report and credit score when approving a loan and determining an interest rate.
- Gather Relevant Documents: Organizing your documents ahead of time can help simplify the application process. You’ll need items like:
- Your driver’s license
- Proof of insurance
- Pay stubs or other proof of income
- Your Social Security number
- Apply to Refinance Your Car Loan: The application process for refinancing doesn’t take much time, and many lenders may make determinations quickly.
- Close on Your New Car Loan: Once approved, you’ll need to close on your new car loan.
Remember, refinancing should reduce your monthly payment or lower the overall amount you pay in interest. However, if you’re behind on your payments, have a prepayment penalty, owe more than your car is worth, or have an old vehicle, refinancing might not be possible.