Is your monthly car payments a burden to your monthly income? Are you looking for ways to have a disposable income every month? Refinancing your car loan could help adequately, as it reduces the monthly car payments.
Ways to refinance to lower your car payment
Refinancing is a process through which you take out a new loan while having the original auto loan on the previous vehicle. You also have the option to refinance through your old lender or by finding a new one. You can hope to achieve a positive result and thus lower the burden on your budget.
Here are the two ways through which you can lower your car payment:
· Find a loan with lower interest rates.
If you have managed to improve your credit score since the beginning of the auto loan, then you may end up qualifying for a loan with low interest. Interest charges can take up a fraction of your wealth, so it will be relieving to refinance the auto loan with a better interest rate.
- Find a long-term auto loan.
If you are willing to stretch out the loan term, this option could be best for you. It means that you will be paying monthly payments for a long period. However, it also means paying a lot more interest charges than the original one.
Typically, you and your vehicle need to qualify for the lender’s requirements. Each lender has varying credit requirements and loan limits, so you have to hunt for a lender that would fully understand your current situation.
Qualifications that are needed to apply for refinancing.
Before considering you, every lender requires you to fill the following set of requirements. But keep in mind, every lender has a varying criterion for accepting you.
- Improved credit score
There is no doubt that lenders prefer borrowers that tend to have a good credit score. However, people with below-average to bad credit scores can also benefit from car refinancing. It is only possible if your credit score has gotten better since you took out the original loan.
- One-year-old auto loan
Lenders are more likely to select you for refinancing if your original auto loan is at least a year old. The reason is that a year or two old has a well-established payment history. It allows the lenders to make a judgment based on insights and facts.
- Vehicle has equity
If you owe more than what your vehicle is worth, you are upside down on your loan. It means that you are not eligible for refinancing your car loan. For this purpose, you need to check your current loan balance. You can do so by requesting a loan report from your lender. Before applying for refinancing, check if you have equity in your vehicle or not.
- Caught up with monthly payments
If you want to draw attention from a lender, then you must be caught up with all of your monthly loan payments. Having a good payment history will drastically increase your chances of refinancing.
- The car has good conditions.
Each lender demands varying car conditions. But the most common ones are: Good mileage and the car should be less than ten years old.
- The loan must qualify.
Lenders have set a specific maximum and minimum loan range. You can ask the lender beforehand and ask. If you incur too little or too much, then your chances of qualifying are unsure.
Here is what you can do when you can’t refinance
If you face problems related to refinancing, talk to your lender and ask for suggestions. Let them know about your concerns and financial situation to understand and give you leniency regarding the monthly payments. However, trading in your car is also another possible solution that you should consider.
Keep in mind that if you start delaying your monthly payments, it will affect your credit score and payment history as well. By default, it will create complications for you shortly.
Are you looking for a way while having bad credit? Consider working with us at CarLoanRefinancing. We have a network of competent dealerships that are well-known for providing good offers to borrowers throughout the nation.