Americans incur a hefty sum of $1.2 trillion on auto loans alone. It takes about ten percent of the overall consumer debt. With increasing unemployment due to COVID-19, Americans are finding effective ways to save money where possible, including auto loan refinance to reduce their monthly payment costs.

Auto refinancing may sound like THE best idea, but most people are unaware of what it entails and its long-term effects. 

All Must-Knows About Auto Refinancing

If you are looking for capable ways to save money from your monthly payments, consider refinancing a high-interest loan into a lower-rate loan. It will help you save money over time.

If you are paying pricey payments each month, refinancing the auto loan to a long-term plan would result in lower monthly payments. However, conditional on the number of months you add to your plan, you’ll automatically have to pay more money over the lifetime of the auto loan. Therefore, do calculations to estimate how much additional money you’ll be paying over the added months.

Beware! Auto loans usually come with an extra fee, and it also ruins your credit score badly. To conclude this, auto loans are not guaranteed “money savers.”

At CarLoanRefinancing, we will provide in-depth answers to your question. So you make the most well-informed decision possible. Here are some FAQs about auto refinancing and related outcomes. Go through them carefully and decide whether you want auto refinancing or not. 

What Is Auto Loan Refinancing?

Auto loan refinancing is the process of replacing your already existing loan with a new loan at a different interest rate. Such loans are taken for cars and paid through monthly payments, which may take over several years.

When Should You Refinance Your Car?

One of the essential factors when considering refinancing is the available interest rate. Interest rates tend to fluctuate regularly, so the interest rates may have dropped since you’ve taken out your original auto loan. Even a 2 or 3 percent drop would save you a large sum of money over the entire loan period.

If your financial situation has improved over time, your lender should look at your debt-to-income ratio. If it’s in good condition, your lender will most likely reduce the interest rate. It will gradually save you a hefty sum of money.

What Items/Documents May Be Needed for a Car Refinance?

To refinance your loan, the lender needs the following information/documents:

• Your ID
• Proof of income
• Financial history
• Proof of residence
• Your vehicle’s information

How Does Refinancing Affect Your Credit Score?

When you apply for a loan, lenders tend to check your credit. They perform a hard inquiry on your credit to check your credit score and history. It’s why refinancing lowers down your credit score temporarily.

If you hold certification for refinancing, you could save money from the monthly payments. If you have other debt to pay, you can utilize the money you’ve just saved.

What Are the Tips I Should Consider When Refinancing?

If you still plan to get an auto loan to refinance, here are some top tips to help you.

Your credit score and profile, car mileage, model, and trim will lead the lender to determine the new interest rate. So it’s best to keep these factors in good shape.

Additionally, the lenders will consider your loan-to-value ratio and the number of payments left to be paid for the original loan to come up with benefits for both parties. When considering refinancing a loan, it’s important to learn how much the car has depreciated, your loan-to-value ratio, and your current loans.

Once you get the desired interest rate, try your best to understand any additional fees or prepayment penalties so you recognize every single penny you will be paying.

If you have understood all of the above factors, take the next step and refinance your car with CarLoanRefinancing right away!