Refinancing your car loan is a relatively painless way to find extra money in your monthly budget, currently hidden inside loan terms that no longer work for you. This can make sense under a few different circumstances, for example, if your credit history has shown improvement.
You can use an auto loan refinance calculator to figure out the auto loan payments. A refi calculator is effective because you can plug in various combinations of values to see which opportunities make the most sense for you to pursue. Your current credit score and loan balance will estimate your new monthly payments for a 60- or 72-month loan. Gather up some additional pieces of information to take to your lender to get the ball rolling on your auto loan refinance plan.
Round Up Your Paperwork
Refinancing your auto loan is going to go a lot smoother if you head into it prepared not just with the information you gained from using the auto loan refinance calculator, but also the facts specific to your existing loan.
Locate a recent payment stub from your current auto loan so that you are up to date with your current monthly payments, the total left on the loan balance, the interest rate associated with your loan, and how much time you have left to repay it. It might also be helpful to find and review your original contract. These documents can all also be sent to you through your lenders customer service department if you have misplaced them.
Evaluate Your Credit
If you have made all your payments on time and in full for a significant amount of time it is highly probable that your credit score has improved, which is a key component that lenders look to when approached with a request for refinancing. Understand that your car payment is not the only thing that impacts your credit though, so take a step away from your auto loan, and evaluate if your other financial commitments are being handled with the same level of responsibility.
If you’re worried that your other payments may not be as pristine as those associated with your auto loan, considering putting priority on bill payment for 6-9 months to build up better credit before you apply for refinance.
Compare the Terms
After you run the numbers through an auto loan refinance calculator and have a general idea of what the new loan might mean for you both monthly, and overall with current interest rates applied, compare your options regarding the length of your loan. You have a choice to either leave the length of your loan unchanged after refinancing or to switch it up. If monthly savings is necessary due to budget constraints you might want to think about extending it by a few months or even a year, to create a little breathing room for yourself.
Although you may pay a little more in total due to more interest charge this is better than missing payments and damaging your credit. Either way, the whole point of refinancing your auto loan is so that the terms look more favorable to you, whatever that means, so compare every angle and negotiate as much as possible.