Whether you are struggling to make your auto payments or are interested in lowering your auto loan rate, refinancing can help you save money. Lower auto refinance rates are available for you to switch to, saving you hundreds – maybe even thousands – over the life of your loan.
In general, the process of refinancing your auto loan is similar to that of a home-refinance program. There are several factors to consider when you refinance car loan rates in 2023, such as the APR finance charges and loan terms. Continue reading to learn how a refinance auto loan could help you today.
Getting the lowest auto refinance rates available starts with understanding how the process works. Much like your initial purchase, it is always recommended to take some time to learn how it works so that you can find the best option available for you. Before you refinance, you (the borrower) and the lender must each complete a few important steps.
The goal of a car loan refinance is to reduce your annual percentage rate, or APR. Rates are dependent on a few financial factors, including your credit score and income. Refinancing a loan requires lenders to analyze your payment history. They look for the number of on-time payments you made as well as how often you made late payments. Lenders are more willing to offer lower APRs if you have a solid payment history; the proof is in the payments!
An auto refinance loan is a type of secured loan, just like a mortgage. It is backed by collateral, or an item of value that the lender can seize if you do not make your payments. When you take out an auto loan, your vehicle is put up as collateral for the lender to take if you stop making payments.
If you fail to repay your loan, the lender will repossess the vehicle to make up for the lost payments, just like a regular auto loan. So, what’s the difference between a refinance car loan and the original vehicle purchase loan?
It’s simple: the goal of getting auto loan refinance rates is to lower your monthly payments through lower APR finance charges.
Even if you get car refinance rates from a lender, the loan could vary based on market fluctuations. That’s why even the lowest auto refinance rates available could be higher than the finance charges you are already paying on the original loan.
This is why getting a lower APR on an auto refinance is much easier if you have good credit and a solid payment history than it is for a mortgage.
So, who determines your refinance rate? Lenders have underwriting departments that are responsible for analyzing your finances as well as the current market. The department also determines your refinanced loan term, which the period of time you have to repay the loan. As soon as your refinance car loan is approved, your new payments will begin.