Table of Contents
- 1 Best Auto Refinance Lenders
- 2 How To Refinance Your Auto Loan
- 3 What If Your Application For Refinancing Is Denied?
- 4 Bottom Line
It could be a smart move if rates have dropped, your credit score was lower, or you didn’t explore all your loan options the first time around.
Here are our top picks for the best car refinance lenders for 2018, along with some tips on how to get the best loan possible.
Ready to get the ball rolling?
Best Auto Refinance Lenders
Auto Credit Express
If you have less than perfect credit, Auto Credit Express may be an option worth considering.
They’re a large network with over 1,000 dealer partners that specializes in helping those with credit woes secure or refinance their existing auto loan.
To qualify for refinancing, you must be current on loan payments and have equity in your vehicle. You should also have a higher credit score than you did when you took out the original loan.
Also, keep in mind that lenders will have their own set of criteria, which usually entails a maximum vehicle age limit of 10 years, mileage limit of 100,000 or less, and a minimum loan amount of $5,000.
You should also know that Auto Credit Express is accredited by the Better Business Bureau with an A+ rating. If you’re interested in refinancing your vehicle with Auto Credit Express, complete the online application. It should only take three minutes and you’ll get a rapid response to know if you’ve been matched with potential lenders.
MyAutoLoan is also an online marketplace that lets you review up to four refinance offers at once.
Rates are as low as 2.24 percent for those with good credit, but having less than perfect credit won’t necessarily prevent you from qualifying.
It’s easy to apply and upon approval, you’ll receive an online certificate or check within 24 hours. Simply submit the online application, explore the loan offers and select the one that best suits your needs. Once you’ve submitted all the necessary paperwork, the lender will take it from there.
If you prefer to explore multiple refinance offers by only completing one application, LendingTree may be a good option.
It’s an online marketplace that allows you to select your desired loan terms (up to 84 months) and view offers without impacting your credit score.
Before submitting your application, you can also use their online tool to view auto refinance rates by location. The form will prompt you to enter your zip code, loan amount and credit rating, and display the lowest APRs available for refinancing by loan term.
If you want to compare multiple offers for your auto refinance, consider LendingClub. After filling out a brief form with some personal and vehicle information, you could get offers from several lenders within minutes.
If any of the terms and rates look favorable, you can then fill out a full application and submit any necessary supporting documents. After that, your former auto loan is immediately paid off with your new loan funds and you can start making payments to your new lender.
In order to qualify for an auto refinancing within LendingClub’s network, your car must be less than ten years old and have less than 120,000 miles on it.
Your existing loan must be between $5,000 and $55,000, at least one month old, and have at least two years of payments left on it. If you meet these basic requirements, you can fill out LendingClub’s rate request form to see if you could save money by refinancing your current car loan.
CarFinance is an online lender that boasts competitive refinancing rates on auto loans.
To qualify, your vehicle must be less than 8 model years old with under 100,000 miles on it, and the loan balance must exceed $7,500.
CarFinance also recommends that you only apply if your credit situation has improved since you took auto the auto loan and if you’ve made timely payments in the last six months.
The application process is simple, and you’ll receive a decision in less than 30 minutes if you apply during their business hours. Even better, you can upload your supporting documents to the website to seal the deal.
AutoPay is also an online marketplace that offers rates as low as 5.49 percent on auto loan refinancing. Customers have three types of refinancing to choose from:
- Traditional refinancing: designed to lower your interest rate and monthly payments
- Cashback refinancing: designed to put money back into your pocket
- Lease payoff refinancing: designed to help you pay your lease in full before the lease term expires so you can keep the vehicle and avoid fees.
Even better, they cater to consumers with all types of credit, so having a low score doesn’t mean you won’t qualify for a more competitive rate. And when you submit a pre-qualification application, AutoPay does a soft pull on your credit so your credit score is not impacted.
How To Refinance Your Auto Loan
Check Your Credit
Before applying with a lender, check your credit to see where you stand. Don’t overlook this pertinent step since credit plays a major role in whether or not your application is approved.
Grab a free copy of your credit report. Review each section to ensure the information is accurate. If you spot any errors or issues, file disputes promptly to have them rectified. You want to give yourself the best possible chance of getting your application for refinancing approved, so you can’t afford to have errors on your credit reports dragging your score down.
While 90 percent of lenders use FICO scores to evaluate creditworthiness, their algorithms tend to vary across the board. So, your concern should be with what’s in your report since that’s where your score is derived from.
You may be able to refinance your auto loan through local financial institutions, like banks and credit unions. However, there are scores of online lenders, including Car Finance, that may be worth considering.
And if you’d prefer a marketplace to maximize the chances of being approved, check out:
- MyAutoLoan, a loan marketplace that will match you with up to four lenders
- LendingTree, a loan marketplace that will match you with up to five lenders
- AutoPay, a loan marketplace that offers several refinancing options (with some as low as 1.99 percent for well-qualified applicants)
Even better, some offer pre-qualification tools that allow you to submit your information without dinging your credit score.
This will help you determine which lenders are offering the most competitive rates and narrow down your options. Most importantly, you may determine that refinancing may not be a good fit if the rates are the same or higher.
(Word of caution: you may be able to secure a lower payment with the same or a slightly lower interest rate, but proceed with caution as it may end up cost you a ton more in interest over the life of the loan. More on this shortly.)
Lenders will need to verify key information included on your application to approve you for refinancing. It’s a good idea to reach out to the lender beforehand to confirm what they’ll need. This typically includes:
- Copy of driver’s license
- Vehicle identification number
- Copy of most recent pay stub (federal tax returns from the past two-years may be required if you’re self-employed)
- Purchase agreement from the initial purchase (or lease agreement)
- Registration documents
Doing so will help streamline the process as you’ll be prepared when the time comes to apply.
Worried about your credit score taking a hit if you apply with multiple lenders? Don’t be. Multiple loan applications will only be counted as a single inquiry if submitted within a 30-day window. Your score will take a small hit, but it beats multiple inquiries at once.
Conduct a Cost-Benefit Analysis
Now that you have the loan approvals in hand, the next step is to analyze the figures to determine if the benefits of refinancing outweigh the costs. You can do so by entering the numbers into a refinancing calculator.
Here are a couple scenarios to illustrate:
Let’s say your monthly auto loan payments are $684 and the remaining balance on the auto loan is $30,000. This amount is set to be paid off in four years.
If your current interest rate is 8.5 percent and you qualify for a lower rate of 4.5 percent with a four-year loan term, you will save approximately $57 in interest each month, and $2,683 over the life of the loan. In this case, it makes sense to refinance.
Let’s say your monthly auto loan payments are $375 and you have $10,000 left on the loan, which will be paid over the next three years. If your current interest rate is 6 percent and the lender agrees to lower the rate by 5 percent, but with a new loan term of six years, your monthly payment will drop down to $242.
However, you will pay $3,893 more in interest due to the extended loan term. In this case, it wouldn’t be wise to refinance your auto loan unless you were desperate for a lower payment.
Review the Final Loan Documents
Before signing on the dotted line, review the loan documents in their entirety. If there’s any verbiage or terms that seem a bit strange or unfamiliar, seek clarity to avoid confusion later on down the line.
Once you approve and sign, the lender will send detailed instructions to wrap up the process. Moving forward, you will deal with the new lender to make payments and address any questions or issues with your loan.
What If Your Application For Refinancing Is Denied?
Take a breather because it’s not the end of the world. In fact, it’s the perfect opportunity to return to the drawing board and figure out what’s dragging your credit score down.
The lender should be able to provide you with insight on why your application was denied, and this will serve as a starting point to make improvements and try again. But if you don’t know where to start, check out our ultimate guide on how to repair your credit.
Refinancing your auto line can be a breeze if you’re prepared for the process. Plus, it can also help you save money and beef up your wallet.