In order to qualify to refinance your car loan, there are a few requirements you have to meet. These include personal qualifications as well as requirements for your vehicle and loan amount. Your credit score and how long you've had your current loan also play a big part in whether or not you can refinance.
Qualifying to Refinance a Car Loan
When it comes to qualifying to refinance an auto loan, one of the first things a lender looks at is credit. You generally need to have good credit in order to qualify to refinance your car loan. However, if you originally took out a bad credit auto loan, lenders typically want to see improved credit, even if it isn't "good" yet.
Another thing that matters is how long you've had the loan. If you took out a bad credit car loan, lenders generally require that you've had it for at least one or two years before they consider you for refinancing.
Whether you're looking to refinance with your current lender or a new one, your vehicle must meet a lender’s refinancing guidelines, as well. This means your car has to be within a lender's acceptable age and mileage range. You must also have equity in it. If you owe more on the loan than your vehicle is worth, you won't be able to refinance unless you can come up with the difference in cash.
Additionally, you must be current on your monthly payments, and the amount that you need to refinance has to be agreeable to the lender. All lenders have different lending limits, so you may need to shop around for one that meets your refinancing needs.
Why Refinance Your Auto Loan?
Qualifying is actually the second step when it comes to refinancing your car loan. Before you jump into applying, you need to decide if this is actually the best option for you.
Typically, people look to refinance when they want to keep their vehicle, but are having trouble keeping up with their loan and want to lower their monthly payment. There are two things you can do to lower your monthly payment when you refinance: qualify for a lower interest rate, or take out a longer loan term.
Both of these options reduce your monthly payment, but only a lower interest rate can save you money on your auto loan. Stretching your loan term lowers your payment, but increases the total cost, since you end up paying interest charges on a longer loan.
Not Ready to Refinance?
If your goal for refinancing isn't to lower your monthly payment, then refinancing may not be the right choice for you. If you're on the fence about keeping your current vehicle, you might consider the option of trading in your car instead.
Whether you're looking for the right start to your refinancing journey, or you just need a more affordable auto loan on your next vehicle, we want to help. Here at The Car Connection, we work hard to match people in unique credit situations to dealerships working with lenders that can help.
We want to save you the hassle of driving around town looking for a dealer by connecting you to one in your area. To get the process started, simply fill out our quick, zero-obligation car loan request form.