Tag Archives: refinance car loan

What credit score do you need for an auto loan

What Credit Score Do You Need for an Auto Loan?

People usually label cars as expensive, but little do they know that their credit score determines the final price they will be paying. To purchase a vehicle, you must take out an auto loan. The interest can add additional dollars to your total vehicle price. Do you know what’s interesting? Your credit score is responsible for inferring your interest rate. So, what credit score do you need for an auto loan? We will discuss it below, but let’s learn about a credit score first! 

What is a “Credit Score”? 

Your credit score is a three-digit score that estimates your ability to pay off the loan. You can find your credit score effortlessly through the top three bureaus like Equifax, Experian, and TransUnion. They use your payment history and information from financing as criteria to generate your credit score. 

Banks and loan lenders use your FICO score as a factor to determine your credibility. You will get a loan with better terms if you have a good score. 

Factors that lenders notice in a credit score.

Here are the five components that make up your credit score. Note that each of them holds a different weightage. 

1. Payment History 35% 

Your payment history, meaning how well you are keeping up with the monthly loan payments, the loan terms, and credit card payments, makes up a big part of your credit score. If you miss or delay a monthly loan payment, your credit score will be affected drastically. It can also ruin your chance to land on an auto loan with a low-interest rate. However, you can better this section of your credit score by paying early or keeping track of credit card debts. 

2. Outstanding Debt 30% 

To be simple, if you have less outstanding debt, your chances to increase your credit score are higher. Furthermore, you can also get a good auto loan with a good credit score! 

3. Credit History Length 14% 

If you have a lengthy record of being responsible with credit, it is beneficial for you! It shows that you can professionally manage your debt and are a reliable borrower. When you are in your twenties, it is a difficult task, but you can achieve it by cutting down your credit card use.

4. Account Age 10% 

This factor is not just the amount of years. All lenders prefer a well-established credit history because it assures them about your reliability and willingness to pay back the auto loan. Therefore, it positively impacts your credit score and overall auto refinancing process. But make sure that you don’t get new credit cards together because it may negatively impact the lenders and lower your FICO score. 

5. Types of Credit Used 10% 

Lenders prefer variety on your credit card, meaning a lender would be impressed if you can handle multiple credits. It will reflect your capabilities and experience in auto loan handling. 

What credit score do you need for an auto loan?

Mostly, lenders have set their limits on credit scores. But according to experts, a FICO score above 700 is enough to obtain a car loan with a better interest rate. However, if your score is over 800, you are guaranteed an excellent loan. 

What are the ways to check my credit score? 

Consider requesting a free credit report if you are behind your credit score. You can get it by reaching out to Equifax, TransUnion, or Experian. You can also apply to check for any errors. 

What to look for when getting a loan

What To Look For When Getting a Loan? Here’s All You Need To Know About It!

As time changes, the methods to look for a loan have also changed significantly. Back in the day, one had to dress up, visit a financial institution, fill out forms and provide documents in person. But nowadays, you can find lenders everywhere! From your television to your mailbox, they are everywhere! Furthermore, you can reach out to lenders online by visiting their site. There you will find a wide range of deals. It allows you to look for the one that suits you the best. However, you must be cautious of scams and unreliable loans. Wondering what to look for when getting a loan? Here, we have made a list of the top 5 things to look for when looking for a loan. But first, let’s learn what benefits you can get by thinking long-term. 

When getting a loan, think long-term. 

Remember that getting an auto loan involves two mega components; interest rate and application process. Understandably, everyone tries to spend less on the loan, application fees, etc. And lenders are aware of these factors. Therefore, they butter you by offering low rates and a smooth application process.

But your auto loan is way more than just an application process. It stays with you for a long time so, you should think carefully. It’s the time when our list of top 5 things to look for when looking for a loan jumps in! 

What To Look For When Getting a Loan?

Keeping these things in check will allow you to lessen your debt, and thus, you gain benefits.

1. The cost 

It doesn’t even need an explanation. Every borrower gives their 100% to lessen the final price they will be paying by any means. Borrowers have two motives when taking out an auto loan; have a low-interest rate or keep the monthly payments low. Whatever the case is, a borrower always aims to save up. 

It depends on two parties, meaning you and your loan lender. 

Besides the loan terms, your credit score, payment history, gross income, and other financial info determine your interest rate for the loan.

2. Convenience in the application process 

Recent loan lending methods have drastically changed the convenience offered. Nowadays, you can contact reliable lenders through your mobile phone and get a loan while sitting on your sofa! 

Don’t let this smooth process lower your guard. You must stay alert and look out for any shortcomings. Don’t compromise on crucial features to save time. 

3. Accessibility to administer your loan all the time. 

Decades ago, administering your loan was only bound to sending a payment check in the payment. But in this modern era, you can track your loan progress, find out the interest cost, figure your savings, etc., with the help of a calculator! 

Nowadays, loans offer a personal dashboard that helps you keep track of your payoff schedule. It prevents you from missing any payment. It’s a creative way to manage your money by working with several apps on your phone.

4. Flexible payment routine 

It is ideal getting on a loan that offers you convenience when paying ahead of time. It also provides another layer of security and safeguards your overpayment. It doesn’t put your money at risk, and you can access it anytime and anywhere! 

5. Good customer service, preferably a human expert. 

It may sound basic, but yes! In today’s advanced world, everything is digital. It does add convenience, but when handling our money, we should discuss with an actual professional human and trust our matters to them comfortably.

Taking a loan from your regional bank or credit union allows you to interact with the workers and involve them in a community that shows care and devotion.

factors that affect auto refinancing

4 Factors That Affect Auto Refinancing

If it’s been a while since you have taken out your car loan, then there is a possibility that many things have changed. Have you managed to better your credit score or lower your DTI (debt-to-income) ratio? If yes, then outstanding! Now, you will be able to refinance your auto loan and save up! Besides, refinancing your car loan also benefits you in other areas. You can effortlessly remove a co-borrower or even buy out your lease through refinancing! There are never-ending advantages that auto loan refinancing gives. But, the question that gets asked a lot is: “What is the rate of approval?” However, before refinancing your car loan, you must know about the factors that affect auto refinancing and your approval rate. 

1. Credit Score 

Your credit score plays an essential part in determining many things. And that is why it holds a vital place in auto refinancing too. Besides contributing to your approval for loan refinancing, your credit score also helps infer the interest rate. Mostly, lenders have set a limit barrier for credit scores and refuse to accept anything below it. Above that limit, they decide the loan terms, such as interest rate and the financing amount, keeping your credit score in mind. Before applying for auto loan refinancing, you must set a core goal, whether you aim for a lower monthly payment or interest rate. After this, you must start working to improve your credit score because the higher is the credit score, the lower is the interest rate. 

Your Score and More 

When you ask people about the factors that affect auto refinancing, you will mostly hear the credit score. But keep in mind, it is a crucial factor but NOT the sole one. Other factors also determine your approval for car loan refinancing. They include the DTI ratio, pre-tax income, and vehicle value. So, let’s learn what each of these means and how they influence your auto refinancing approval. 

2. Debt-to-income (DTI) Ratio:

In layman’s language, your debt-to-income ratio is dependable for determining your ability to pay off your car loan. The credit bureaus calculate your DTI by examining the available information on how much you pay on necessities and your monthly gross income. There is good news for individuals with a bad debt-to-income ratio. Even if your current DTI doesn’t qualify, you can better it by paying off previous debts and monitoring the loans you will incur in the future. By having a lower DTI, you have a low risk of rejection from the lender. It all clarifies how your debt-to-income ratio influences your approval rate for car loan refinancing. 

3. Pre-tax Income 

Every lender ensures that your new loan’s monthly payment is relatively lower than what you can afford. If you land on a loan that has a monthly payment higher than your monthly gross income, then you can fix it by making adjustments. One way to reduce your monthly payment is by extending the long term. Even though this factor determines your acceptance, it also suggests you have the right to refinance. 

4. Vehicle Value 

How much does your car worth? It is a big question that lenders ask you before refinancing your loan. They will ask for every detail of your car, including model, mileage, age, trim, and features. These factors will determine the loan terms and affect your approval rate. It is important because lenders will estimate how much to lend. However, lenders usually lend an amount more than the vehicle’s actual worth, considering the other loan factors. 

Auto Refinancing During Covid

Auto Refinancing During Covid

Without any doubt, Covid-19 has influenced every aspect of our lives, including auto refinancing. It has drastically affected how we live, work, play, hang out, and spend our free time. In addition, it has also impacted our budgets and schedules. When we adapt to this change, we find alternatives to control our basic choices. 

After realizing the new reality, you will need to refinance your auto loan. This positive move will help reduce your burden and make you financially stable. 

Let’s see how auto refinancing during covid has changed and affected us. 

Things that haven’t changed in auto refinancing during covid-19 

Auto loan refinancing still includes determining your credit score, vehicle’s value, financial standing, and credit history even during the pandemic. The entire auto refinancing process still involves all the previous steps, meaning you have to apply for a loan to a lender. After evaluating your application information and credit report, the lender will decide the interest rate and other loan terms. Here is a list of factors that lenders consider when approving a loan application: 

1. Loan value 

2. Payment to income ratio 

3. Debt to income ratio 

4. Other factors include current job, residence history, credit history, past-due payments, and bankruptcy record. 

Make the best out of the low auto refinance rates. 

As explained above, most refinancing conditions are the same as those before the global pandemic. But some lender criteria have changed, for example, the recent low interests. The federal government has lowered the interest rates. In addition, lenders compete over vehicles’ refinancing because of sudden plumage in the car manufacturing industry. This competition proves beneficial for consumers as more credit-challenged individuals can refinance their car loans. It makes lenders provide you with more opportunities and lower interest rates. 

How did the lenders tighten the eligibility criteria? 

Auto refinancing during covid is quite complicated because due to the covid-19 pandemic, many people lost their jobs and became unemployed. Therefore, to refinance your auto loan, you must provide proof to confirm your employment. Remember that the government’s aid or unemployment will not qualify you for refinancing, so you must have another source of continuous income or an employed co-borrower who qualifies for the refinancing. In addition, lenders impose strict restrictions on the vehicle’s age, mileage, etc. It eliminates risks and allows lenders to lend a loan.

Despite these new challenges, refinancing is ideal for saving money and finding lower interest rates. 

Make auto refinancing quick and beneficial. 

Here’s is how you can get the best out of auto refinancing during covid: 

  • Research about all the available options for you. Seek help online or ask your friends for advice. Once you’ve found a reliable lender, you can start handling paperwork instantly. 
  • Collect the required documents. It mainly includes your driver’s license, insurance card, proof of income, etc. 
  • Get your vehicle’s title and speed up the process. 
  • Check your ID and vehicle’s registration
  • Look for addresses and phone numbers of people that can serve as references.
  • If your state requires notarized documents, then make sure to fulfill its needs. 

Find ways and make your car loan affordable. 

Evaluate all the given refinancing options and decide what suits you and your vehicle the best. Then, keep all the required documents ready and find yourself a reliable lender to refinance your auto loan. Refinancing in the pandemic is a hassle, but you will receive positive results if you successfully land on a better car loan. 

When To Refinance a Car and When to Wait

When To Refinance a Car and When to Wait?

It is no doubt that last year, the pandemic gave us a hard time purchasing a new car. Due to the unfortunate circumstances and chip shortage, the new car supply has dropped significantly. Therefore, the demand for vehicles has skyrocketed, just like the prices. However, people continued their car shopping without being affected. Studies show that in the U.S, nearly 25 million people purchased a vehicle in 2021, based on an auto loan. 

You may have no idea when it is the perfect moment to refinance a car. So for this purpose, take a look at when (and when not) to refinance your auto loan.

There is good news for all the auto loan borrowers! If you have a bad credit auto loan, then refinancing your car loan is the ideal option for you. On the other hand, if you find your monthly payments too high, want a better loan offer, or want a lower interest rate, you should refinance your auto loan right away! 

Refinance your car when you see these three signs 

When you see these three key signs, rush to refinance your auto loan and enjoy a tranquil, debt-free life in 2022:

1. Interest rates are lower:

The federal interest rate has dropped nowadays due to some historical reasons. So don’t miss this golden opportunity and get started with your auto loan refinancing right away. These rates won’t last forever and change rapidly, so don’t waste any time!

2. There is an improvement in your credit score:

Another sign that indicates you should refinance your auto loan is your improved credit score. Most lenders decide your loan offer, aka the interest rate, after analyzing your credit score. That is why if you have a credit score, you get a lower interest rate loan. Your credit score shows improvement when making your monthly car payments on time. 

3. You have a thick credit file: 

Don’t confuse this with your credit score, as both might seem similar. You can define your credit file as a long-term record of repaying debt from several loans. If you are currently paying your first car loan, your credit file would be “thin” because the lender doesn’t have enough data to assess your credibility.

If you are refinancing your auto loan for the first time, wait for at least 12 to 18 months and let your payment history establish. However, if you are not a first-timer, you can apply for car refinancing after six months of taking out the original loan. 

Is refinancing a car the right choice for you?

Not everyone fits for car loan refinancing. You can’t refinance if you recently took out a car loan. Your credit score is responsible for determining what interest rate you would qualify for. If your credit score has dropped since you last took the initial loan, you will get an even worse loan offer with a higher interest rate. In this case, you should hold off refinancing and improve your credit score. Your car insurance premium may also get affected because of refinancing. Consider consulting your insurance provider for a more in-depth analysis on when (and when not) to auto refinance. 

Here’s how you can get started with auto refinancing 

To initiate refinancing, you have to set a goal. For what purpose are you refinancing? Do you wish to have a low monthly payment? Do you want to increase or decrease your loan term? Do you want to save money over the lifetime of your loan

Depending on your refinancing goal, you can find a new lender and make changes to your loan. For refinancing purposes, you need the following documents: 

  • Your credit report 
  • You ID 
  • Vehicle’s details/documents 
When Is The Right Time To Refinance

When Is The Right Time To Refinance?

Even if you already know about how to refinance and what is auto loan refinancing, there is always a complicated question that remains unanswered: When is the right time to refinance? But our answer is quite simple: Refinance right away! Here is why you should look into refinancing today. 

Interest rates have hit rock bottom now.

The last few weeks of 2021 are the right time to consider refinancing because the interest rates have drastically dropped. The main reason is the tremendous impact on health and the economy because of COVID-19. The pandemic led the Federal Reserve to lower the interest rates in 2020 because of the increasing unemployment and other uncertainties in the early days of the COVID-19. This change in rates allowed businesses to give more jobs and increase budgets. The adjustment in rates also influences the auto loan interest rate. 

So, it is most likely that the interest rate has decreased since you took out your initial auto loan, so you should refinance right away! 

But here’s what FED has warned about 2022 interest rates 

But don’t rely on these temporary low rates and wait any longer because the Federal Reserve (FED) has shown eagerness to bring the rates back to normal in 2022. It is because the country is the only way to overcome the current wave of inflation.

Therefore, keep in mind that these low rates are not here to stay forever. It is a golden opportunity so, get your hands on lower auto refinance interest rates while you can!

Refinance now and save your money 

Other than this golden opportunity, the end of the year is the ideal time to consider refinancing. Some people wish to lower the monthly payments, while some want to change the loan term. 

Whatever goal you aim for, do you want to reduce your financial burden and focus on the updated financial goals? 

Refinancing is best when it comes to improving cash flow. It gives you clarity about how your financial situation may look in the future and gives you the strength to achieve your new year’s goals. What is a better way to start a new year than saving money? 

Is refinancing a good idea for you? 

When is the right time to refinance? Because if you fulfill the given criteria, you can start looking for a new loan offer while the interest rates have drastically dropped in 2021! 

  • You have improved your credit score 
  • You have a good payment history 

Things you need before refinancing 

Let’s give you an insight into what things are essential to refinance your car loan. 

The first thing is first: Have you set up your goal? Before refinancing, you must know what you’re aiming for. Do you wish to lower monthly payments, or want to save money over the lifetime of the loan, or both? 

Conditional to this goal, you can change your loan terms and get the desired result. Here are all the things you need in this regard:

  • A good credit score: This is the most vital factor in refinancing requirements. You can get a free credit report from your credit card provider, bank, or credit union. 
  • Your ID 
  • Car details: You must have basic knowledge about your car’s details, including its VIN, model, age, mileage, etc. You will need your valid driver’s license for this purpose as well. 
Things to Know Before Applying For Car Loan

5 Things to Know Before Applying For Car Loan

We all know that when purchasing a car, it’s ideal to pay in cash, whether you pick up a brand new one from the car dealer or get a preowned vehicle from a friend. It is a fact that auto loans help us a lot, just like our fours wheeler does! But before buying the car, you will have to borrow a loan to make the purchase. When filling out the loan application, you will get a closer look at sales tax, extended warranty, auto loan insurance, and all the dollars you will be paying. Let’s look at the five things to know before applying for a car loan: 

1. Know your credit score 

Your credit score plays an essential factor regardless of what loan you take out. It is responsible for determining everything! When I say everything, it means EVERYTHING from your auto loan interest rate, monthly payments, and even the “yes” or “no” from the lender depends on how good/bad your credit score is. 

Keep in mind that every lender uses a different scoring system. Their criteria for approval may differ from the other lender, so be mindful of which company you are choosing. 

2. Take 14-days to apply for all the loans: 

When a lender inquires about your credit history, there is a slight decrease in your credit score. But if you manage to complete the application process in 14 days, you minimize the negative influence. For this purpose, you should pre-arrange your auto loan plan to avoid multiple hits on your credit score. 

When the “shopping period” is restricted to 14 days, all the inquiries made will be considered one. Therefore, your credit score won’t be affected much. 

3. Get pre-approved and then shop for loan rates 

Isn’t it great to walk into a car shop with an already established financing offer by a bank or credit union? Such a pre-approved finance offer ensures that you already have a loan offer for your loan. It also relieves your mental stress, and you can focus on purchasing a car of your choice. 

Planning gives you control over many auto loan refinancing factors, including your monthly payments, interest rate, etc. 

Another added benefit of having a loan offer already with you is that having the loan allows you to control the prices and features. With the loan in your pocket, you will enjoy the upper hand. 

4. Do calculations before signing a deal 

As you are stepping into financing your car, you must be aware of the factors that will determine your monthly car payments. The interest rate takes up only a minor portion of it. But as you step into a car dealership, you will be welcomed by many additional costs. 

To be precise, sales tax highly impacts the monthly payments the most. However, it is not the only thing that makes up your costs besides the vehicle’s actual price. 

The overall vehicle price also includes the dealer fees and costs of the additional features. Although you can negotiate on what extras you want to add or not. Also, learn how to reject the offer when the overall price is out of your budget. 

Use an auto loan calculator to avoid getting ripped off while in a hurry. You can find such resources on the internet for free. 

5. Learn about dealership financing 

Let’s move to the last out of the five things to know before applying for a car loan. Sometimes, you may find dealership financing the ideal option because deals like cashback rebates and 0% financing may seem to be attractive. 

But remember that such offers are only for lenders having a perfect credit score. But on the other hand, if you have any negative on your credit report or a bad credit score, you will never qualify for such offers. 

How and Where to Refinance Your Auto Loan

How and Where to Refinance Your Auto Loan?

Previously, we have gone over the benefits and drawbacks of refinancing your auto loan. We have also discussed when is the right time to refinance your car loan. But now, in this blog, we will explain how and where to refinance your auto loan. We will also go over the requirements of refinancing. Let’s take a deeper look into auto loan refinancing. 

When not refinance your existing auto loan? 

Before getting into refinancing, let’s discuss when refinancing is not the right choice? How refinancing an original auto loan will impact your credit score? 

Everyone who knows about refinancing must be aware of how crucial credit history is as a factor for refinancing. A lender is most likely to approve you for auto refinance, conditional to your credit history and current credit score. The credit union or a bank that provides loans is highly aware of the borrower’s FICO credit score. To be precise, FICO’s credit score is based on your credit report information and your current loan plan. 

If there is a decrease in your credit score since you initially took about the loan, then there’s no chance of getting a better plan offer. Therefore, it would be useless to apply for refinancing in this situation. Refinance your car loan lowers your credit score a bit, but it’s only short-term and insignificant. 

On the other hand, you should still wait if your credit score is but you lack the credit history. Most first-time car owners have a credit file that is “thin” because there isn’t enough data available about their payments for the lender to assess their credibility. To establish a good credit history, you have to pay your monthly payments timely. 

Lastly, you should not refinance if the auto loan interest rates are in the market are higher than you took out your original car loan. Wait till the rates get better and refinance with the lowest interest rate available. 

Steps to refinance your car 

If you are still here, let’s learn how and where to refinance your auto loan. Once you qualify for refinancing, you will be able to get a better interest rate, or lower monthly payment, or even both! And now, after having an established credit history and a good credit score, you can also remove the consigner from the loan. 

Let’s learn about some basic requirements for refinancing. Like what documents do I need? What are the steps to follow? And how to avoid any fallbacks when refinancing? 

The first thing is to set your main goal. Do you want a low monthly payment? Do you wish to save money from the entire loan? Do you desire to pay off the lender quickly? 

Conditional to your goal, you can find a refinanced auto loan that fits all of your needs. Here is all the essential information that you need to provide your new plan lender: 

Your improved credit score. 

A credit score is necessary when talking about refinancing an auto loan. You can get your free credit report from your bank or credit card provider. 

Your ID. 
Required car details. 

The lender will demand information about the vehicle. So you must know about the car’s VIN, model, age, year, and mileage. You may also need your driver’s license. 

Where is the best place to refinance? 

Many of us are unaware of the refinancing options when taking out the auto loan. But now, since you have done your homework, you may be wanting to learn about the financial institutions to refinance with better interest rates and loan terms. 

You can refinance through megabanks. They have multiple branches that offer great convenience and interest rates! 

Why and When to Refinance Your Auto Loan

Why and When to Refinance Your Auto Loan?

Undoubtedly, many of us end up with undesirable auto loans because of many unfavorable situations. Besides, people also tend to pay higher interest rates at the beginning of their financial journey because the lender wants proof of their credibility. After all, first-timers have a “thin” credit file that doesn’t give enough information on their credit history and willingness to pay back the loan. Therefore, let’s take a look at why and when to refinance your auto loan: 

The pros of auto refinancing: 

1. Lower your monthly car payments

The main goal of people when looking into auto loan refinancing is to lower their monthly payments. It depends on your interest rate, but on average, you can save up hundreds of dollars each month by auto loan refinancing. However, lower monthly payments lead to an extended loan term. 

2. Find a loan with a low-interest rate: 

Keep in mind that you don’t pay the price on the price tag only when shopping around for a new set of wheels. If you decide to finance your car, the interest adds to your car amount. Other extra charges determined by interest rate and loan term may also include. 

To avoid any confusion, consider using an auto loan calculator to see the total amount you’ll be paying when financing your car. 

3. Consider adding or removing the cosigner from the loan 

It is common for youngsters having a bad credit score to purchase a car. But for this purpose, they may need the help of a cosigner. It is someone who is financially healthier and has a good credit score. It all makes sense, but sharing car ownership with someone is not an ideal option. Because when you decide to refinance your vehicle, you make a new agreement with your lender entirely. 

4. Switch lenders 

If you are unsatisfied with your current lender, you switch to another one through auto loan refinancing. You can refinance with another lender if you are unhappy with the interest rate or the loan term.

The cons of auto refinancing 

1. You may end up paying more over the lifetime of the loan 

As explained above, lower monthly payment is why people choose to refinance. But doing so results in expending more than the actual loan amount because of the added interest charges.

2. Your credit score can be affected 

When you refinance your car loan, your credit score takes a temporary hit, which recovers within a year or two. But it leaves a negative impact on your credit score, which may create problems for you in the future. 

Besides considering why and when to refinance your auto loan, you should also consider how refinancing can negatively affect your credit score. 

How does auto refinancing negatively impacts your credit score? 

Due to Credit inquiry: 

Lenders inquire about your credit score to determine what rates you deserve. Many hard pulls on your credit score in a short time can impact the score negatively. 

Therefore to minimize the impact of hard pulls when applying to multiple lenders, you should submit all the loan applications with 14 days. All the hard pulls done in this period will be considered one, and your credit score won’t be affected much. 

When should I refinance my loan? 

Refinance when: 

1. Your credit score improves 

As we know, a good credit score is the main requirement of auto loan refinancing. So refinance when you have reached the excellent point in credit score. 

2. Interest rates have dropped

The FED (aka the Federal Reserve) often changes the interest rates depending on the economic situation. So don’t miss the chance and refinance right away when the rates are low. 

3. You have an established credit history 

To refinance your auto loan, wait for a year or two after taking out the original loan and let your payment history establish. The payment history ensures your credibility and the willingness to pay off the balance. 

upside down in your car loan

Are You Upside Down In Your Car Loan?

Are you upside down in your car loan? Wait, before getting into further details, first, let’s discuss what does the phrase “upside-down” or “underwater” means when talking about auto loan refinancing? This situation occurs when the loan borrower owes more money than the actual worth of their vehicle. 

For example, in the case of a car accident, your car is destroyed. And now it is worth nothing more than a few hundred dollars of scrap. You can’t repair this car, but you are left with thousands of dollars to pay to the lender even after getting your insurance aid. 

Such an unfortunate situation can also occur without a catastrophic car accident. Say that you are moving to a different city where you don’t need a car at all. In this case, you will have to sell your vehicle to support yourself with the moving expenses. Even though yours is entirely new, you can’t sell it and pay off all the loan debt you owe. 

New cars are known to lose value in a blink of an eye. And whatever the case may be, you must pay off the remaining loan. 

Keep in mind that your car is also a property like your other assets, and its value rises and falls depending on the market value. If your car is not as popular as it used to be (maybe a new and better model has come out or this model has received backlash from the public); there will be a definite decrease in its value, regardless of how much money you owe on its loan. Other than this, if the vehicle has higher mileage and terrible conditions compared to another same car; its value will decline faster than ever. Moreover, one thing that needs your attention is that regardless of how good your car is (condition-wise); you will never obtain the financing fees and cost of the additional features.

Consider refinancing 

Are you upside-down on your car loan? Refinancing is here to save the day! 

In order to get out of your not-so-good loan, you may have the sudden urge to trade your car for another one. Since car dealers have been in this line of work for a long time, they may offer you an attractive deal: use the money from your old car to finance a new car. The reason is that they want to make new sales and increase the trade-in rate. However, don’t rely on such dealers because these offers may worsen your financial situation and put you in more debt. 

A better option is to refinance through a reliable company, such as CarLoanRefinancing. We have a connection with a network of loan partners who can provide you with the best refinancing offers in the market! But to qualify for a good deal; you will have to improve your credit score so you can be fit for low-interest rates and low monthly payments. 

Refinancing allows you to pay off some of your previous debt. So, you no longer are underwater or upside-down on your auto loan. If you have made a final decision to refinance your auto loan, consider signing up for GAP coverage. Such coverage is life-saving in case of car theft and totaled because it makes up for the difference between what you owe in the loan and the worth of your car. 

By refinancing your auto loan and making thoughtful financial judgments, you can get out of your upside-down auto loan within a short period of time. This wise decision will help you grow financially, and eventually, you will thank yourself in the future!