There are many misconceptions that prevent people from even looking into a refinance auto loan because they assume they are not qualified or the process is too complicated to even bother. Here are the answers to your questions about the process of refinancing your auto loan.
Can I refinance even if I am upside-down on my loan? Yes, because many lenders recognize that cars depreciate more quickly than any other large purchase. Most loans available have a loan-to-value (LTV) that is above 100%. When compared to LTV, the lender will be most interested in your ability to make payments
Am I eligible for a refinance auto loan even if I have bad credit? It is true that consumers with credit scores under 650 may have trouble securing low-interest loans, but if you have made steady payments on your current loan so far, you are still an excellent candidate. Plus, if you have a gross monthly income of $2000 or more, you can be approved with various online lenders.
Is shopping around for a new car loan complicated? No, but shopping around is encouraged so you can be sure that you obtain the best rate possible. Applying to several lenders is important because refinancing rates can vary by up to 7%. Clearly, it pays to shop around.
How much does it cost to apply? Many lenders offer free online refinance auto loan applications and do not charge document handling fees. When it comes time to reissue a title and license with the DMV and pay taxes, these fees end up costing between $5 and $80 depending on the state and process.
Can I be approved even if I am self-employed or once filed for bankruptcy? Lenders will inspect the applications of self-employed individuals in more detail, but you can still obtain your loan. You may need to prove two years worth of federal tax returns and supply references to verify your income. If you have filed for Chapter 7 or Chapter 13 bankruptcies, you can still be considered if they have been discharged. However, if you have had multiple bankruptcies in your lifetime, you will probably be declined.
Is now a good time to get a refinance auto loan? There has hardly ever been a better time to refinance because rates are historically low. The Federal Reserve has cut the Federal Funds Rate to .25%, meaning the bank’s cost of money is cheap. Also, lenders can offer rates of about 4% to prime customers because of this cut.