Car loan refinancing allows you to pay off your current car loan with a refinancing car loan from a different lender. This new loan needs to have a lower APR in order to make the refinance worth your while. What's good about refinancing is that it makes your monthly car loan payment much lower, plus your interest rate drops. This in turn allows you to pay off the balance of your car loan even quicker.
It is suggested that people who are paying a high APR and who have bad credit look into car refinancing in order to lower their APR. If you are considering refinancing your car loan, you may want to do it relatively early. With car loans, the interest is mostly paid in the earlier payments. In other words, the earlier your car loan is refinanced, the more money you save; if you wait until the fourth or fifth year to refinance your car loan, your savings will be much less.
There are a few other guidelines pertaining to the situations in which refinancing is a viable option. For instance, if you have just graduated from college, it's a good idea to wait until you've landed a job and have been there for at least six months before refinancing. Lenders will most likely verify job status and income. Don't apply if you have moved in the last six months either. Lenders like to see some stability and a permanent address. Before you apply, make sure you have credit card balances paid down and have taken care of any other debts that will show up on your credit report. A previous car loan or mortgage on your record helps as well, and finally, do not apply for a car loan until three years after you filed for bankruptcy.
These tips revolve around and work towards one goal: improving your credit score. Your credit score has an extreme affect on your life; it determines how much your loan interest rates will be and can even affect your ability to land a job. A bad credit score can cause you to pay higher insurance premiums as well. Before you talk to a lender about car loan refinancing , make sure you are familiar with your credit background and credit score so that the lender cannot lie to you in any way about it.
The credit score scam occurs more than you would expect. Perhaps this scam is the reason why thousands of car buyers are paying extremely high APRs when they shouldn't have to. If you don't know your own credit score, this could easily happen to you. Your application is sent to the finance guys for approval, they may intentionally write a low score on it, claiming that score is yours and because of it, they cannot offer you the special low interest rate. Instead, they slap a 10.9% on you and in the end you are the one who feels responsible. These people usually cannot give a detailed explanation of how they came to that number. If you have your credit report with you, you can really make them scatter. Bottom line: don't let these people take advantage of you!
By Kelley Caner