How to Refinance a Car Loan
Refinancing a car loan is not always easy since cars depreciate in value over time. If the borrower has a car loan that carries a high rate of interest, refinancing may make sense if current interest rates are now lower. The best way to determine if a refinance is viable is to find out the value of the car as it compares to the current loan balance.
- Use a search engine to find a website where you can check the valuation of your car. Locate your car and find out how your current loan balance compares to the loan value on the vehicle. Check a second website to compare the different valuations.
- Contact the lending institution that holds your current car loan. Explain that you want to refinance the loan and find out what paperwork the lender needs to process your request. If the lender needs you to fill out a new application, you may be able to over the phone since your information is already on file.
- Let the lender know if you want cash from the refinance or if you only want to lower the existing payment by extending the loan term. The amount of cash you can receive on a cash-out refinance depends on the value of the car and the current balance on the loan. Ask the lender to give you an approximate figure for the new monthly car payment to see if refinancing makes sense.
- Find out if the lender needs to inspect your car before you can get an approval on the refinance. Clean and service the car if the lender does need to see the vehicle. If the car is in good condition you stand a better chance of receiving an approval on the refinance.
- Contact a different lender if you are unable to get an approval on your refinance request. Fill out a new loan application and give the lender the specifics on your car. Close on the loan if the lender approves your request, and verify that the loan payoff gets sent to your old lender.