Car refinancing loans are an ever-growing trend in the consumer finance world, but many people still have no idea what they are, how they work or why they should apply for one. If you're one of these uninformed consumers, it's time for you to get in the loop and learn the ins and outs of auto refinancing. Get out a pen and paper, take notes, and get ready for a free lesson. You're about to change the way you look at auto loans.
Back in the "old days," you used to apply for an auto loan, hope for the best rate, and take the pain if the interest rate you were approved for wasn't exactly the interest rate you were hoping for. Even if your credit improved over time, you were still stuck paying the same interest rate you had been pinned with when your credit report was suffering from dings and dents. The auto loan industry wasn't exactly consumer-driven.
To the joy of many, that's all been changed. If you're not happy with your current auto loan rate, simply look into the many car refinancing loans that are available to you. You're not stuck with a 17 percent interest rate when your current credit report indicates that you deserve a rate of 7 percent. You're no longer at the mercy of your high-interest auto lender; the ball is now in your court.
Auto refinancing is very similar to refinancing a home, except it is extremely easier, faster, and costs nothing to do. Thousands of consumers are learning that car refinancing can save them thousands of dollars over the term of their loans. These are consumers who watched interest rates drop after they took out their auto loans to consumers whose credit has significantly improved since the time of their auto financing. How much money can be saved? It depends on your loan's terms; but if you take a look at the table below, you'll see exactly how much of a difference car refinancing loans can make.
|Amount ||Payment- 48 mths. |
|Payment- 48 mths. |
|Monthly Savings ||Total Savings |
|$10,000 ||$289 ||$239 ||$50 ||$2,400 |
|$15,000 ||$433 ||$359 ||$74 ||$3,552 |
|$20,000 ||$577 ||$479 ||$98 ||$4,704 |
The above table illustrates a consumer who had financed their car when they were suffering from bad credit and had to settle for a high-interest car loan. Now their credit is cleaned up, and there's no reason for them to continue to throw their hard-earned dollars into the pockets of their lender. As you can see, the savings can be substantial. A consumer refinancing from an already low interest rate of 8 percent to a lower interest rate of 6 percent would obviously not save the same amount of money as shown above, but their savings would still be hundreds of dollars over the term of their loan, making auto refinancing a very rewarding financial decision.
If you don't own your car and are leasing it instead, don't worry. You may still be able to benefit from the services offered by auto refinance lenders. Some of these lenders offer what is called a lease buyout loan. The process is almost identical to refinancing a regular auto loan, except that the lender buys out your lease instead of paying off a previous loan balance. In some cases, you will be required to pay license, title, and registration fees, as those may not be included in the loan amount you receive from the finance company.
So now that you know what car refinancing loans are, why you should get one and how much money they can save you, it's time to figure out whether or not you would qualify for one. The first thing to look at is how much you owe on your car. If you owe less than $5,000, don't bother applying for any of the car refinancing loans; you won't meet the minimum refinance requirements.
While the exact limits set will vary from lender to lender, the amount you owe on your car must generally fall between $5,000 and $100,000 in order to qualify for an auto refinance loan. However, if you live in Arizona, you have to owe more than $10,000 to qualify due to a law mandated by that state. If you owe $10,000.01, you're okay; if you owe $9,999.99 or an even $10,000, don't bother.
What kind of car you drive will also dictate whether or not you qualify for car refinancing loans. Lenders don't care how fast your car is, how nice it looks or what kind of gas mileage you get, but they do care whether or not your vehicle has been rebuilt, has been salvaged, or is a branded title vehicle. No matter how great you think your car is, if it falls into one of these categories a lender won't approve it for a refinance. Recreational vehicles, motor homes, and conversion and camper vans don't qualify either.
Another factor that can nix your auto refinance deal is if your vehicle is a commercial vehicle such as a dump truck, tow truck, freight liner, or tractor trailer. Taxi cabs and limousines won't qualify either. Even if you drive a regular car but you use it for commercial purposes, you're not going to qualify for the car refinancing loans. However, if you drive the average economy car, sports car, SUV, minivan or luxury sedan and the amount you owe falls within the lender's refinancing limits, you're in luck. Lenders have no problems refinancing these vehicles as long as you meet their credit and income requirements.
Which brings us to the conclusion of our lesson; a loan is a loan. As wonderful as car refinancing loans are, you'll still need to apply and you will still need to meet the lender's requirements just as you would when applying for any other consumer loan. However, the substantial savings you can enjoy are well worth the small amount of time and minimal effort it takes to apply for your auto refinance loan.