How to Refinance a Car Loan

When you start falling behind on your auto loan payments, you’re putting your car at risk. The last thing you need is for your provider to initiate a repossession. The good news is that you do have options, even if you’re falling behind on payments. One option is to refinance a car loan with more favorable terms for you, the borrower.

Are you unclear about what exactly it means to refinance a car loan or how it could benefit you? If so, then you’re far from alone. Most Americans are not aware of their options to refinance. That’s why only about 12% of car buyers ever refinance their original loan. Learn more about your options below and find out how we can help you resolve your auto loan debt if it’s becoming unbearable.

What Does it Mean to Refinance a Car Loan?

For most Americans, car loans are a long-term loan that spans over several years. Since your financial situation can change over the years, you may find yourself questioning the original terms of your loan. Often, you’ll start reconsidering your loan terms when you’re struggling to make payments, but it might also be a good idea to reconsider those loan terms when your financial situation has improved significantly.

Why? You might be able to refinance that original loan in a way that it makes it easier for you to pay off. Refinancing is a way of replacing your old auto loan with a new one. As you’d imagine, this new loan should have terms that are more favorable to your current financial situation. You may be wondering — can you refinance a car loan immediately? Most lenders won’t refinance a car for at least six months, but you can technically refinance a loan immediately if you find a lender that’s willing to work with you.

How to Refinance a Car Loan

Are you wondering if refinancing your old loan would be beneficial for you? Use this refinance car loan calculator to get an idea of how you could lower your monthly payments with a new loan:

If you determine that refinancing is right for you, then the next step is determining how to refinance a car loan. Your first step should be to analyze your current loan and the terms. Consider what you’re paying now, how much time you have left on your loan, the interest rate you’re paying, any fees or penalties you’ve incurred, and the current struggles you’re facing.

Assessing Your Eligibility for Refinancing

Next, you will want to take a look at your current financial situation to determine what type of refinancing you might be eligible to apply for. First, it’s a good idea to look at your credit report. Your score, existing debts, and other details could impact your ability to refinance. In general, the better your score is, the more likely you are to get approved for a new loan. You’ll also want to consider your current income levels because that will impact your lender’s perception of your ability to pay.

If your score or income levels aren’t up to par, then that might be something you want to work on before you apply for a refinanced loan. If you can increase your score, then you’ll be able to get more favorable terms.

Shopping Around for the Best Refinance Deal

Next, you’ll want to shop around for the best deal you can based on your qualifications and the proposed terms of your lender. Some lenders won’t require you to have a great credit score or a massive income. These loans, however, might have less-than-favorable interest rates or fees.

Consider factors like the length of the loan term and the interest rate. In general, you’ll pay more with a higher interest rate loan and a longer loan. Different lenders will provide different options based on your finances, so don’t hesitate to check out potential rates with several lenders before making a decision.

Getting these documents (or copies of these documents) compiled in one place will help ensure that your application process goes smoothly.

Preparing the Necessary Documents

As you’re shopping around for a good rate, you can also start to gather up all the documents you’ll need to apply for a refinanced loan. Here are a few things you will likely need:

• Your driver’s license
• Your social security number
• The vehicle identification number of your car
• Your vehicle registration papers
• Proof of insurance
• Proof of income
• A statement regarding your current loan status from your current lender

Finalizing the Refinance

Once you’ve found a lender with good terms and you’ve collected all your documentation, it’s time to apply for your loan. If everything goes according to plan, then you’ll receive an approval letter from your lender with additional paperwork for you to fill out.

If you can’t seem to finalize a refinance loan deal with a provider, then don’t assume you’re out of options. There are still ways of getting out of your auto loan. You can learn how here.

Are You Struggling to Refinance Your Loan?

In simple terms, refinancing your auto loan means replacing your old loan with a newer loan with better terms for you. When you’re struggling to make payments on your current auto loan, your provider has an incentive to work with you. It takes time, money, and a lot of effort to go through a repossession, so your lender would likely prefer to refinance an old loan first.

If you and your lender are not agreeing on refinancing terms, then there might still be other options available to you. Depending on your situation, you may be able to go through another type of debt settlement solution. Here at United Debt Settlement, our agents specialize in debt settlement, so we can help you come up with unique solutions to your car debt problems. Contact us now to discuss your situation with one of our agents.