Refinancing a Car Loan

Top 5 Misconceptions About Refinancing a Car Loan

Do you wish to find a way to lower your monthly car payments? You know what, even saving $50 or $100 a month adds up to make a hefty sum of money in a year. According to a study done on auto loan refinancing in 2021, a car owner saves up to $990 annually through refinancing. 

If you can find a loan refinancing with a lower interest rate, you’ll save large amounts from your monthly payments. 

What Is Auto Loan Refinancing?

In simple words, refinancing a car loan means taking out a new loan to pay off the old loan. Since the motive of refinancing is to save money, you should find a new loan with a relatively lower interest rate to save up. 

Since refinancing is similar to taking out a loan, the whole process is similar to applying for a personal loan. It requires you to have a well-off credit score and search for the most competitive interest rate to benefit from it. 

If you think you are ready to shop for refinancing offers, you should be aware of these misconceptions. Understanding the refinancing details is the best way to get succeeded and, most probably, save money. 

Here are the top five repeated misconceptions about auto loan refinancing:

Misconception #1: Auto refinancing is a time-consuming process

Whenever you plan to resell, trade, or refinance a car, you should be well aware of its value and cost. The value is what determines whether you will get a good deal or not. Since refinancing is taking out a brand new loan, you will have to get your car graded beforehand because it is the factor that will decide on the interest rate. The better the condition of the vehicle, the lower the interest rate. 

Don’t you worry! Appraisals are very convenient, all thanks to efficient online sources. Your lender will look into the car model, mileage, trim, condition, and history and take care of the appraisal. 

Misconception #2: Refinancing is inconvenient 

Getting the ideal refinancing deals requires research and effort. But your lender will offer great help to make this process easier. 

As you have heard, refinancing requires a visit to the DMV, but like an appraisal, your lender takes care of it. However, if you choose (company) for refinancing, we’ll have you covered. You will not have to stress over the appraisal and visit the DMV with us.

In general, you only have to go through the following few steps to get your auto loan refinanced: 

  • Pre-qualification: Check your credit score to determine whether you qualify or not. A soft inquiry doesn’t affect your credit score at all.
  • Credit application: Once you’ve applied to refinance, a hard inquiry will take place.
  • Finalization: You have to submit any extra information, such as car titles. 

Misconception #3: Refinancing requires a large sum of money

Since refinancing helps you save money, the fees related to the process are low as well. These fees include re-registration and lienholder fees, which are entirely inexpensive, and your lender will take care of it. 

Important: Before going for refinancing, make sure that your balance is free from any prepayment penalty cost.

Misconception #4: After purchasing a car, you need to wait to refinance the car 

This misconception is not true at all. You can refinance right away after purchasing a car or, you can also refinance before making the first car payment. 

One reason to wait for 6 months before refinancing your loan is your credit score. Let it bounce back to normal, so you can effortlessly refinance to tackle all the hassles. 

With CarLoanRefinancing, there is no time limit set for refinancing an auto loan. You need to be eligible for the set criteria. 

You can look into the eligibility criteria on our website or contact the customer help center. 

Misconception #5: Refinancing lowers your credit score 

Your credit score may indeed dip down once your credit undergoes a hard inquiry. But remember that it is temporary. The effects of this hard pull would disappear within two years only.

Auto loan inquiries are grouped as single inquiries within an assigned time. For example, VantageScore provides you with a short rolling period of 14-days while FICO gives you a period of 45-days.