For security reasons, your session has been timed out. To continue, Please login.
The following are the steps you can follow to make your refinance a success:
Lenders typically require certain documents in order to verify your identity, evaluate your creditworthiness, and process your loan application.
Here are some of the documents a lender might ask you to bring when you apply:
The goal of refinancing is typically to get a lower interest rate, monthly payment, or both. If your credit score isn’t up to snuff, though, you may have a hard time accomplishing that goal.
To see where you stand, start by checking your credit score. You’ll also be able to see the different factors that impact your score so you can pinpoint where you can improve if needed.
The higher your credit score, the better your chances of getting approved for a low interest rate. If your credit score isn’t considered prime or super prime, you can take steps to improve your credit score before you apply. Keep in mind, though, that your credit score isn’t the only thing lenders consider.
The score is far less relevant to the credit decision than looking at their usage of credit and the depth of their credit history.
Once you choose the lender with whom you want to work, you can start getting ready for the application. With your documents in hand, you can head to the nearest branch if you’re applying in person, or simply go to the lender’s website to apply online.
Filling out an application shouldn’t take too long if you’ve prepared and have all the documentation you need, though the length of time it takes to approve your application can vary depending on the lender you choose and the documents you submit.
If you get approved, the lender will provide you with a loan amount, interest rate, and any applicable fees. At that point, you can decide whether to accept the loan.
Shopping around is the best way to find the lowest interest rate available to you. Compare at least three to five lenders to see what kind of interest rates you qualify for.
Here are some of the factors you’ll want to consider as you compare your options.
Annual percentage rate (APR)
This number includes both the interest you’ll pay and any additional fees.
In some cases, a loan with a lower interest rate may be more expensive than a loan with a higher interest rate because of the other fees, and this will help you figure that out.
A short loan term could make your new loan more difficult to afford, even if it offers a lower interest rate, because it will require higher monthly payments.
On the other hand, a longer term will increase the overall cost of the loan, since you’ll be paying interest over a longer period of time.
Penalties and fees
When considering a refinance, and while that is certainly important, they should also be on the lookout for other fees that could add to the cost of the loan.
Lenders might charge include:
Pay close attention to the lenders disclosures and other fine print to understand which fees you might be on the hook for.
Your new lender will pay off your old loan once you’re approved and accept the offer, though the specifics of how this is done can vary. Some lenders will deposit your new loan amount into your checking account and allow you pay off your old loan yourself. Other lenders will pay off your old loan on your behalf.
Either way, your previous lender will then transfer the vehicle’s title to your new lender, who will keep it on hand until you pay off the loan in full. If your old loan has a payment due soon, you may want to contact them to let them know that your entire loan will be paid off so that you can avoid being charged a late fee.
Once your new loan is approved, your new lender will also let you know when your first payment is due and other payment terms you need to know.
If you had automatic payments set up on your old loan, make sure to turn those off. Then set up auto pay on your new loan, so you don’t accidentally miss any payments. If you have room in your budget, you can also consider making extra payments in order to pay off the loan early and save some money.
Things to be noted
Be wary of extending the loan term
While opting for a longer term loan can certainly reduce your monthly payment, it can also significantly increase the total cost over the life of the loan.
In other words, a shorter term loan is usually a better deal, though there are situations in which extending the term may be warranted.
Avoid going with the first offer
Many banks offer promotional rates as a way to get people in the door and it may be tempting to jump on it. But there’s no guarantee the rate they’re offering is the best you can get.
Don’t forget to read the agreement properly
When you fill out the application and accept the loan, the lender will likely ask you to read and sign several disclosure forms. Resist the urge to speed through this part of the process.
In taking out this loan, you are making a financial and legal commitment to the lender. You owe it to yourself to take your time and read the agreement, ask questions, and make sure you understand what you are agreeing to.