It’s easy to overlook the cost of auto refinancing with mortgage terms grabbing all the attention. Yet terms on car refinancing have edged lower as the cost of lending has gone down for finance companies. And car buyers who didn’t remove the most favorable rates in the past year or so can capitalize by refinancing their loans. The option will need to be of particular finance charges to anyone who obtained a loan from a car dealership. That’s because dealers are a middleman in the transaction. They usually mark up the interest charges terms they take from finance companies to make funds. Another reason to funds how much you’re paying? Dealers are leaning more heavily on auto loans for profits as shoppers take savvier about exploring car prices online.
The result is that refinancing could bring significant savings.
Let’s say a customer is paying 10 percent on a $20,000 loan. The average rate to refinance a three-year-old car right now is about 8 percent, according to Bankrate.com. So refinancing on average would save around $250 a year. That adds up nearly $1,000 over the life of a typical four-year loan.
Here’s a rundown on auto refinancing.
How Does It Work?
Refinancing an auto loan is far easier and cheaper than refinancing a mortgage. There’s no need for an appraisal and borrowers can typically determine out if they’ve been approved within an hour of applying on the internet.
If you decide to accept an provide, the finance company will need some paperwork to complete the procedure. This will include copies of the car’s title.
There’s no universal interest rate for this document but try asking your lending institution for a “payoff quote” so that you might refinance. Once the paperwork is in hand, the new loan can most of the time be refinanced in a day or so.
As with any financial matter, you’ll want to be mindful of fees.
There will be expenses to transfer the title of the loan and re-register your car. These fees vary depending on the bank and the state where you live, but the number cost shouldn’t exceed $25 in most states. There may be added fees depending on the lending institution.
Some lending institutions charge upwards of a $200 processing fee. But this includes the selection to have the lending institution file the title transfer with the DMV on your behalf.
Unlike refinancing a mortgage, the cost of refinancing an car finance is rarely a deal breaker. In fact, online finance companies like OpenRoad Lending don’t charge fees for refinancing at all.
Who can refinance?
Lending standards remain tighter than before the economic downturn. But if you qualified for a new car loan in the past year or so, refinancing shouldn’t be a terrible. Don’t be discouraged if you’ve been late on a few payments. Your chances of refinancing must be great as long as your overall credit profile hasn’t deteriorated.
The standards vary, but financial institutions will have certain minimum criteria on the car’s age, mileage and other finance terms so be sure to ask about what rates your bank offers. Most will refinance a vehicle that is seven year old or newer (2004 models) and less than 70,000 miles.
The specific interest rates you’re offered will depend on your credit score. Average finance terms right now range from 5.7 percent for those with the most favorable credit report score scores (720 and above) to 18.5 percent for those with poor scores (below 590), according to Yahoo’s Auto Finance Center.
To start scouting what interest rates are available. If convenience is significant to you, it’s also worth checking the terms at the lending institution or credit union where you already have accounts. Note that refinancing may be especially beneficial to borrowers whose credit score scores have improved since they got their loans. This can be the case for borrowers who’ve been making timely payments.
You can find more information about car refinancing and auto loans online at OpenRoad Lending. You will find useful tools to use when deciding on which loan is right for you and even helpful negotiation tips to use with the dealer.