How To Refinance Your Car Loan
Even though you may have finally managed to get your signature on that dotted line and secure yourself a car loan, things don’t always pan out the way we might like them too. While this is particularly true for those of us with a sub-optimal credit score (who may well need to get going on credit repair, which is a catch-all term for techniques you can apply in order to give your score that much-needed boost), it can happen to all of us.
The reason it’s more likely to occur if you’ve got a poor credit score is that the loan deal you will have been offered will be tougher to meet than if you had a perfect 850. This disadvantage could have manifested itself in the terms of the loan or the length of the loan, but whichever way it worked out, refinancing a car loan is something that happens to hundreds of people all over the world every day.
Is It Hard To Refinance A Car Loan?
But how exactly do you go about refinancing a car loan? Is it possible, or is it too difficult to be practical for most of us? If you’re undergoing credit repair, how likely is it that the process is going to affect your ability to refinance your automobile loan?
There are a lot of questions involved in handling this procedure, and when you’re trying to do your own research on the web, it can be easy to get overwhelmed by the amount of choice on offer. These days, it can seem like everybody has an opinion, and everybody also claims that their opinion is the correct once. So where are you supposed to start if you’ve been getting going with credit repair but still find yourself needing a way to refinance your car loan?
Today’s article will focus on answering as many of these questions as possible, while keeping in mind the context of the most difficult scenario—i.e., that the person looking to refinance their loan has a less than perfect credit score and is undergoing the process of credit repair. We’ll do our best to lay out exactly what it is you need to know in order to make refinancing your automobile loan a reality, while keeping in mind that we don’t want to overwhelm you even further.
Without further ado, then, let’s get straight into it. Here’s our guide on refinancing your car loan if you’re currently trying to perform credit repair on your less than ideal score.
Why You Might Want To Refinance Your Car Loan
First of all, we’ll have a brief discussion about the benefits that could be on offer if you do indeed manage to refinance your car loan. After all, there’s hardly any point in telling you all about how to do it if, in the end, you don’t even need to take advantage of any of the available benefits.
It can be a good idea to refinance your car loan in a range of different scenarios, of which having a score that requires some credit repair is only one. The biggest reason people try to get a new deal on their automobiles is that it’s a way to save money, as well as that it’s pretty easy to do.
To take just one example, imagine you’ve been diligent in performing your credit repair techniques and your score has recently undergone a sizeable improvement. If you manage to get a new deal on paper with the improved score, there’s every chance that it’ll be easier to cope with, in terms of both the length of the loan and the monthly payments you’ll find yourself having to cough up.
The loan terms could be extended or truncated, depending on what’s good for your current financial situation. If you’re having a hard time making the payments, it might be an idea to extend the total length of the loan, in order to reduce the total value of the monthly bill and as such give yourself a better chance at not having to default on the deal.
On the other hand, if your financial situation has improved (possibly because of the credit repair process you’ve been (following), you might well want to take some time off of the loan and increase the monthly payments, in order to get out from under the heel of automobile debt as quickly as possible.
Applying to refinance your loan will rarely take much more than an hour or so, and plenty of lenders are highly incentivized to make it happen for you because it’ll be a good financial decision for them as well. Indeed, some claim to be able to approve or reject a proposed refinancing scheme in a matter of minutes.
While don’t recommend trying to break the land-speed record for securing a new deal—financial decisions, even relatively minor ones like refinancing a car loan, are a huge deal and certainly shouldn’t be rushed—it’s definitely nice to think that you won’t have to spend the entire day at the lot, hashing out the terms of a new contract.
Step One: Have Your Documents Handy
The first thing you’ll need to do is ensure you’ve got the right documents with you in order to make securing a new deal a practical possibility. Loan applications require a host of different information to be provided by the potential buyer in order to make sure that all of the paperwork is above board.
One of these items is your monthly pay stub from your current loan. You’ll need to ensure that you know the terms of this loan inside and out. This will prove to the dealer that you know what you’re doing, and they won’t try to pull a fast one kin you and stick you with a sub-optimal loan that you most certainly do not deserve, especially if you’ve been diligent in your credit repair.
Be sure to know how long you have left on the loan, the interest rate you’ve been paying, how much you pay per month, and how much total balance is left on the loan itself. Make sure there are no prepayment penalties in your original loan contract. This is vital, and overlooking it could well come back to bite you in the terms of the new loan you’re trying to secure for yourself.
In addition to the information about your current loan, you’ll also need a driver’s licence, your social security number, proof of employment or solvency (most often, this takes the form of pay stubs from your current employer or some other proof that you’re actually employed and have a reliable stream of income), as well as the registration number of the car itself.
Step Two: Get Familiar With Your History
The second step is to take a good hard look at your credit history. It’s easy to pull up your own credit report, and if you’ve been practicing credit repair you’re probably intimately familiar with this process already, but the main thing you’re looking for is any history of problems, like late payments.
It’s a good thing to keep in mind that there are hundreds of credit scoring algorithms out there, and we all have dozens of scores, each of which is slightly different from each other. The three main bureaus, EquiFax, TransUnion and Experian, use their own scores, but the individual dealerships you may find yourself going to in order to refinance loan could use a slightly different score.
The takeaway here is not to get too focused on any one particular number, and to try instead to get a good general sense of where your credit’s at.
Step Three: Shop Around
The third step is to apply for a loan. We here at autoloan.ca recommend trying to window shop between different refinancing companies in order to be able to compare interest rates and subsequently finds the best possible choice for your situation.
Applying is free, and it doesn’t generally take longer than a few hours. Besides, you’re not going to make a decision just yet—you’re trying to get a rough sense of how much you’ll be spending or saving so you can weigh up the various options and make an informed choice.
Don’t feel limited by needing to go to certain companies, or needing to hit a certain number of applications. While it can be especially easy to become daunted by the barrage of financial information you’ll find yourself subjected to if you’ve already been getting going with credit repair, we want to stress again that the point of step 3 is not to find the perfect mathematical refinancing deal for you. You’re just trying to get a general sense of the state of the market.
Step Four: Make The Call
Step four is the final step, and while we could split this up into a couple of different steps, we think it makes much more sense to include it as one point in our checklist. All you’ve got to do now is break out the calculator (you probably have a favourite calculator if you’ve been practicing credit repair, so dust it off and get it ready for use) and run the numbers on the various deals you’ve been offered.
The important things to keep in mind when you’re considering different loan deals are a) the length of the loan in terms of months, b) the size of the monthly payments, and c) the interest rates. All of these taken together will give you a solid overall picture of which company is offering you the best deal, and you’ll be able to work it into your budget as well.
When you’ve come up with the best auto loan refinancing deal for your credit score (which is hopefully a little healthier than it was before you start the credit repair process), all that’s left to do is call up that company and head over to get your name down onto the contract.
With a little luck, you’ll have managed to secure for yourself a significantly better deal on the same vehicle that you’ve been driving for all this time.
Keep in mind that while there’s no limit to the amount of times you can attempt to refinance a car loan (especially if you keep going with credit repair and find your score going through the roof), at some point you might as well just stick with one, given that you’ve been paying it off for all this time and you’re almost out of the woods as far as debt is concerned.
We hope you’ve enjoyed this handy guide to how you need to go about applying for a refinancing of your current car loan. The process can be daunting (and it can be a lot to take on if you’ve been working on credit repair in the meantime as well), but the benefits are significant and solid, and your bank account will thank you at the end of it—not to mention the applause your mind will be treating you to as a result of relieving it from so much stress.
If you’re having a hard time securing funding because of your credit score (and haven’t had the chance to work for long enough at your credit repair plan), why not consider giving us here at autoloan.ca a call? We consider every single application we receive, and don’t discriminate based on your current score, so you’ve really got nothing to lose by calling us up and seeing if there’s something we can devise to help you out with your current situation.