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Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct your own research and compare information for free - so that you can make sound financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site come from companies that pay us. This compensation can affect the way and where products appear on this website, for example for instance, the order in which they may be listed within the categories of listing in the event that they are not permitted by law for our mortgage, home equity and other products for home loans. But this compensation does not influence the information we provide, or the reviews you read on this site. We do not include the entire universe of businesses or financial deals that might be available to you. Tom Werner/Getty Images
3 minutes read. Published 24 February 2023
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers to navigate the details of borrowing money to purchase an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to manage their finances with precise, well-researched, and well-written facts that break down complicated subjects into digestible pieces. The Bankrate promises
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You have money questions. Bankrate has the answers. Our experts have been helping you manage your finances for over four years. We continually strive to give consumers the professional advice and tools needed to be successful throughout their financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our content is honest and reliable. Our award-winning editors, reporters and editors create honest and accurate content that will help you make the best financial decisions. The content we create by our editorial staff is truthful, impartial, and not influenced from our advertising. We're transparent about the ways we're in a position to provide quality information, competitive rates and useful tools for you by explaining how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods and, services, or when you click on certain hyperlinks on our site. Therefore, this compensation may impact how, where and in what order items appear in listing categories, except where prohibited by law. This is the case for our mortgage home equity, mortgage and other home lending products. Other factors, such as our own proprietary website rules and whether a product is available in your area or at your personal credit score may also influence the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include details about every financial or credit products or services. If you're having trouble paying your current loan payment, changing your auto loan with a brand new one the best option to save money while you remain behind the wheel of your car. However, there are some typical mistakes to avoid to ensure you don't end up in yet another financial crisis. Seven mistakes to avoid when refinancing your vehicle. Avoid these common pitfalls when refinancing your vehicle loan. 1. Not checking refinancing requirements Lenders have specific requirements when it comes to refinancing. Keep an eye out for requirements pertaining to the car's age, mileage and the amount left to repay the loan. For instance, lenders usually require at least six months of repayment to the loan and a balance of between $3,000 and $5,000 to refinance. Bankrate tip
You can find specific refinancing guidelines on the lender's websites or Bankrate's .
2. Not checking with your current lender initially. Although your current lender may not offer the most competitive rates, it's the most effective place to begin. Before you look into refinancing options that aren't offered by the current lender it is advisable to approach them and tell them about your situation to see if they can help. Some lenders offer , that alters the conditions, the payment due date or interest rate , to provide borrowers with financial relief. Tip from Bankrate
Even if you don't follow through with refinancing your loan there is a chance that they'll offer a better deal than a new lender might.
3. The extension of the loan term too long Refinancing is a way to save money, but if you extend the term of your loan too much and you are spending more money over the loan's life. Although it will result in the payment will be lower however, you'll also have to pay more interest. Bankrate tip
Prior to term adjustment Take advantage of auto refinances to confirm you will save cash.
4. Don't take into account your credit score In most cases of financing, your credit serves as the main factor for approval. Thus, improve it and prior to refinancing your loan. You'll be more likely to receive the available and get more money in the end. loan overall. A credit score of 670 or greater usually qualifies for borrowers with the highest interest rates. Tip from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Only shopping with one lender As you would when you are shopping for your first auto loan, we recommend comparing at least three lenders. While deciding on the initial loan offer might be tempting, not all options are created equally. In the end, the lower the interest rate, the less you'll pay for your car loan. You want to ensure you're getting the most competitive rate out there. Bankrate tip
Compare the current rates provided by a variety of lenders. Pay close attention to the eligibility requirements, repayment options, and how they compare to the current loan.
6. Insolvency on your loan Prior to refinancing, you should determine what equity in your vehicle lies with the help of . Equity is the amount by which the value of the car is higher than the amount you have to pay on the auto loan. If you have debt that is greater than your car is worth, or hold negative equity, refinancing is likely not a good idea. Bankrate tip
Don't refinance a vehicle you aren't able to afford. Examine the areas where you might be in excess and calculate the expected costs prior to signing an additional loan.
7. Don't give up after the first rejection loan refinancing requirements differ between lender to lender, so the fact that you've been rejected by one lender doesn't mean that you'll be rejected by all. If you're wondering, "Why can't I refinance my car?" you have the right to question your lender to explain the reasons under the (ECOA). They have to explain why the application was rejected. Bankrate tip
Knowing the reason you were rejected can help you improve your chances of getting approval later on. If, for instance, the credit rating of yours is low it is possible to work on improving it before you apply again.
The bottom line: While refinancing your vehicle loan is not without risk but it's a great method to cut down on the monthly costs and to continue paying for your car. Make sure to keep these mistakes in mind and stay up-to-date with current information to ensure you walk away with the best loan to meet your needs.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ways and pitfalls of taking out loans to purchase a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to manage their finances with concise, well-studied details that cut complex subjects into bite-sized pieces.
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