Auto Refinance Loan Strategies

Obtaining an auto refinance loan can give borrowers the opportunity to lower their interest rates and/or lower their monthly payments.

What is an Auto Refinance Loan?


An auto refinance loan is similar to a mortgage refinance and will pay off your current car loan, replacing the interest rate. It can also replace the term with better conditions for the borrower. It can be a fast and simple process.

Once the borrower is approved for the auto refinance loan, the new lender pays off the old loan and the old lender transfers the title to the new one.

Why Refinance my Auto Loan?

Many reasons can factor in to the refinance of a current auto loan, the most common of which is getting a lower interest rate and/or to lower monthly payments. Lowering the interest rate but keeping the same terms on the new auto loan will also reduce the total interest paid over the course of the loan. However, if the borrower chooses to go with a lower payment but extend the term of the loan, it could increase the total interest paid over the term of the loan.

How Much can I Save?

This amount will depend on how much you still owe on the remainder of the current loan, the differences between the old and the new interest rates, the term of the new auto refinance loan, and more.

Your credit score will also factor in here. The better the credit score, the lower the interest rate can be and you will have better options for the terms available.

Tips When Applying

You can increase your chances of obtaining the better loan with a lower interest rate by monitoring your credit rating. This is an instant process online and you can do so through the Experian, Equifax or TransUnion websites. Be sure that you get both the credit score and the credit report. Know also that it is possible for you to obtain your credit score without damaging your credit rating. You will need to know this credit score before beginning the auto refinance loan application process. Arm yourself with knowledge.

If you recently filed a bankruptcy, you may want to delay in refinancing your auto loan for a few reasons. One, you will only end up paying a higher interest rate. Two, you will need to have your bankruptcy discharge papers in hand to present them to the new lender. Three, if you wait a while, you can establish new credit accounts, which will in time decrease the possible interest rate you may be offered.

To qualify for an auto refinance loan, there are some basic important requirements:

  • the original purchaser must be the one to apply for the refinance
  • names on both loans must be spelled exactly the same
  • the new loan cannot be less than $7500
  • the value of the car cannot be less than the amount owed

To learn more about an auto refinance loan, visit www.carsdirect.com

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