Requirements to refinance auto loan

Requirements to Refinance Auto Loan

Do you wish to refinance your current auto loan? Are you unsure about the needed requirements? Besides having a good credit score, you must fulfill five other essential requirements to refinance auto loan. We have explained each of them in detail.

What are the requirements to refinance auto loan?

Auto loan refinancing means replacing your current car loan with a new one, having a better interest rate, or/and having a longer loan term. Keep in mind that you take out a new loan for the previous vehicle. Typically, lenders require you to wait for a year or two before refinancing your auto loan, as it allows them to judge your credibility. 

You can contact your current lender to refinance, or you can find a new lender. Indifferent to what option you choose, you must meet all the requirements to refinance. Refinancing is not just for everyone. The whole process demands a ton of patience, documentations, credibility, and passion. 

Here are the five requirements that every lender demands:

  •  Being current with your payments 

The lender will disapprove of you for refinancing if you are not current with your monthly car payments. You have to pay your original auto loan payments on time every month so that your refinancing lender gets an idea about your credibility and qualifies you for refinancing. 

  • Should not have negative equity in the vehicle.

You must ensure that your car is worth more than the balance you owe on the auto loan. If the amount is in negative figures, you are upside down, meaning you have negative equity in your car. It is a highly undesirable thing, and there is no way that any lender will approve you for refinancing. 

  • Your vehicle must qualify the lender’s requirements.

Lenders are specific when it comes to a vehicle. They have set requirements and require vehicles to meet them in order to refinance. Most of the requirements are set around the vehicle’s age and mileage. If your car has too many miles on the odometer or is too old, the lender will turn you down.

  • Your loan balance falls within the lender’s limit.

Lenders also have a maximum and minimum limit for the loan balance. If you have too much/little loan balance to pay off, the lender may disqualify you from refinancing. 

  • The car’s title must be clean. 

Before refinancing, you must ensure that your vehicle is free from branded titles, like salvage or rebuilt. Besides, your vehicle mustn’t be a commercial vehicle. 

How can I refinance with a bad credit score?

If you failed in improving your credit score after taking out the initial loan, you might be wondering whether it is possible for me to refinance or not. In some cases, you can, but in others, you can’t. Some lenders may approve you for refinancing while having a bad credit score, but you shouldn’t make a mistake by relying on them. However, some lenders will straight up reject you based on your credit score. 

Don’t lose hope! The good news is that you can perfect your credit score by putting in some effort. If you keep up with your monthly payments, you will see a significant improvement. Keep this good habit, and after a few years, you can refinance right away!

Are you looking for a lender to refinance? 

Are you looking for a way to lower your monthly car payments? We, CarLoanRefinancing, have a network of reliable dealerships across the U.S. They have all the resources to help credit-challenged individuals and suggest workable options. 

We can get you matched with a perfect lender for yourself who can help you refinance your auto loan. You need to fill out our free auto loan request form and get started with the refinancing process right away!