If you are not satisfied with the terms of your car loan, you can refinance it to get a better interest rate, alter the length of the loan, or get a lower monthly payment. If you've been waiting for your credit score to improve, it's possible you could lower your interest rate by refinancing the loan. This could save you money over the life of the loan. If money is tight and you need a lower car payment, refinancing can often help with that as well, although it usually means extending the loan term and paying more for the car in the long run.
Items you will need
- Existing car loan documents
- Pay stubs
- Tax return
- Credit score
Review your existing loan documentation. Write down the payment amount, interest rate and payoff date. Call the auto loan company to determine the exact payoff of the loan and if there are any penalties for paying it off early.
Pull together recent pay stubs and tax returns. Lenders typically require this information when qualifying you for a new loan.
Request quotes on an auto loan refinance from your bank, credit union or online brokers. Ask them not to pull your credit at this time. When multiple lenders pull your credit for the purpose of approving a loan, it can lower your credit score. Provide them with an estimate of your credit score. If you don't know it, you can pay to see your scores from all three major credit reporting bureaus through the Annual Credit Report website. Most credit monitoring services supply the scores for free if you sign up for their monthly monitoring. Once you've decided on a lender, they usually want to pull your credit to verify the score you provided.
Write the payment amount, interest rate and payoff date for the quotes beside the information on your existing loan. Compare the information and decide which loan is best for you. For example, if you're looking for the cheapest payment and don't mind extending the loan, choose the loan with the lowest payment. However, make sure the interest rate is comparable to the other loans. A high interest rate can extend the term of the loan significantly, costing you much more over the long run.
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