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3 tips for refinancing your car loan this year

19th July 2022 Print

Do you want to refinance your car loan? With rising interest rates, it’s important to follow the tips here to get the best possible rate. 

Why Should You Refinance Your Auto Loan? 

Many auto loan customers decide to refinance their vehicles so they have lower payments and pay less interest over the loan’s life. When you refinance your car to a lower rate, it’s possible to save thousands of dollars over time.

Paying a lower rate on your car loan can give you more money to pay off higher-interest debt. Or, you could put that money into savings or a mutual fund account. 

It’s also beneficial to refinance your auto loan into a shorter term so you can pay it off faster and pay less interest. Some consumers also may need to refinance their auto loan to remove a cosigner. 

If you’re thinking about refinancing, check what your payment could be with an auto refinance calculator

When You Shouldn’t Refinance

Are you in the midst of getting a home loan or other type of financing? It may be best to wait to refinance your auto until that other purchase has closed. If you apply for another auto loan, it may lower your FICO score and could increase your home payment. 

Also, it’s important to check if your current car loan has a penalty for prepayment. If it does, you may not want to refinance at this time. 

Now let’s look at some simple ways to get the best deal when you refinance your auto loan. 

Keep Trying If You Are Declined

There are a lot of places you can try to get a lower-cost car loan. But if you aren’t approved, don’t despair. You can try at other places that may approve you.

However, take a look at your credit report to figure out if there’s something you can do to improve your chances. For instance, if you have a $5000 balance on your credit card, this could significantly affect your credit score, so try to pay this down as much as you can. 

The type of car you have also could be a factor; older cars with higher miles tend to have higher rates. Just remember to try a few lenders to see if you can get approved at a lower rate. 

Apply Within A 30-Day Period

Every time there is a hard credit pull on your credit report, it will lower your score. But if you apply for several car loans in a 30-day period, it only counts as one credit pull. 

So, it’s best to apply for several car loan refinances during a 30-day period so you don’t lower your score significantly. Also, you shouldn’t worry too much about shopping for the best rate because many lenders aren’t going to give you a hard time trying to find the perfect deal. 

Get A Shorter Term

If you’re going to the trouble of refinancing, it’s best to get a shorter term with a lower rate. You may end up with the same payment or a bit higher, but you’ll pay less over the loan’s life. If you really need to lower the payment, go for a longer period, but remember you’ll pay more over the long haul. 

Refinancing your car loan can be a fantastic way to get a lower rate and lower payment. Or, you can shorten the term and lower your rate. Either way, make sure you shop carefully and get the best deal. If one lender doesn’t offer the terms you want, try a few more.