A smart consumer knows he should seize every opportunity that comes knocking at his door – as long as it allows him to save more. Car refinancing is appealing to those who originally got a car loan when their credit score was less than perfect! Now that they have worked hard on improving their credit, its time to reap the benefits!
You should ONLY look into refinancing your car loan if you have improved your credit significantly. Some people just feel like they should wait 3 years and refinance. And sometimes your credit can indeed improve a lot during that time. But you need to be practicing good credit habits.
Important things to do BEFORE apply for a auto refinance loan:
- Make it a priority to pay all your bills on time. You may want to utilize your banks bill pay service. Make sure your payment will get to your credit WELL BEFORE your due date.
- If you are in the habit of waiting till the last minute to put your payment in the mail or to schedule bill pay. Consider allowing your creditor to take the payment automatically from your account. This option will usually allow you to set your payment to go out the night before.
- Make it a habit to monitor your credit report (if you are a part of our credit repair program simply review the ones in your back office). Be on the lookout for any unrecognized charges.
- Consider investing in a service like Life Lock. Even people who have credit problems can fall prey to Identity theft. Its up to you to do everything to protect yourself and your family. (if you are part of our credit repair program life lock is included. You just need to activate it in your back office)
- Don’t apply for a lot of credit. Each time you apply for credit it will bring your credit score down if the lender is doing a hard inquiry. Also if a lender sees that you have a lot of outstanding debt, it will hurt your chances of being approved for your refinance loan.
- Concentrate on paying down your current debt. You want to be under 30% credit utilization.
Now you are ready to apply for your car loan refinance.
First – do your research. Sometimes the bank you are currently with can provide you with a good rate. Ask them if they do refinances and what their current rate is first. You want to compare what they have to offer with other financial institutions.
Look online and in your own backyard. The internet has made it very simple to compare rates. So simple that sometimes we miss out on a great rate offered by a small local bank that isn’t really marketing their refinance loans online.
If you have an older car be aware that some banks have an age cutoff. If your car is older than 5 years old, you should make sure they will refinance it BEFORE you apply.
Next – make sure you have the following information available about your car:
- Vehicle make, model and year Vehicle mileage (vehicle should have fewer than 75,000 miles)
- Vehicle Identification Number (VIN)
- Any vehicle features and special options
- Loan balance
- Name of the lending institution to which you are currently making your car payments
- Account number for your current loan
Finally – prepare your documentation. Some banks give approvals based on credit. But if your credit score is still borderline (650 or below) you want to avoid these guys. Their approvals are done by a computer so you can’t really state your case to a human.
If documentation is required they will usually want 3 months w-2 (to verify your income) and / or your last years tax return. Make sure you have them on hand when you go to the bank. Or scan them and have them ready to email / upload if you choose an online bank.
In closing remember the name of the game is to save money on your car loan. Don’t get lulled into a refinance that EXTENDS the length of your loan instead of lowering the interest rate. Yes, with a longer loan you are paying less. But in the long run you are paying a lot more for your car.