There are many ways of bettering the interest rate on an existing car loan. One of these is through refinancing of auto loans. Refinancing makes more money available to you through the lower interest rate at which you get the new loan. The new loan is used to pay off the current balance of the ‘old’ loan.
If you have a car loan and the national interest rates are low enough compared to the existing rate of your loan, consider refinancing to get a better rate. This will reduce your monthly payments so you can save more money. Whatever you use the extra money for is entirely your decision.
The following steps show you how to go about refinancing to get a lower rate for your auto loan.
1. Understand that there is no penalty for moving your car loan to another lender if the rates there are lower. Why do I say this? There are many people who would simply not even try to get lower rates even if they know or are informed that national interest rates are much lower. So first things first. Go online or check up with your local mortgage company and know the current interest rate for auto loans.
If you purchased your car from a dealership and used their financing, chances are your loan is most likely with one of the major banks or a major automaker credit company. Dealer financing usually come at higher interest rates than car loans you obtain elsewhere. Dealer arranged financing may be hassle-free but an auto loan from a local bank will come at a lower rate than what the car dealership would get you.
So what can you do to get these low-interest rate car loan lenders? Go online and search for them. Check your local newspapers as well because you can find some lenders there too.
2. Consider using your local bank or credit union. If you are not a member of a credit union, join them. Credit unions are one of the most overlooked financing sources for loans by customers. Regardless of your profession, you can join a credit union and be in a position to reap the benefits they offer to their members. Check on the credit union membership requirements and join.
3. Now the refinancing part. To get the best benefits of refinancing, do it in the early months when you start paying off the loan. There are two options here on how you go about the refinancing and they both depend on your credit rating. If your credit rating is good, you should be able to get your refinance loan at a lower rate, without much problems.
However, if your credit score is just about borderline bad, we recommend that you do not make too many credit enquiries. Anytime you make an enquiry on your credit, it reduces your credit score. Whenever you apply to a lender for a loan, they would make an enquiry on your credit rating and this is what reduces your credit score.
So go ahead and shop around till you get the best deal and make your application. Once you know that that lender is the best option for you, simply make your application.