Several factors will affect a major decision like refinancing car loan. Thus, it may be prudent to take the following situations into consideration. In the past year, interest rates for auto loans have fallen. The interest rate on your auto loan may have fallen since you took out the loan in the first place. You may save a significant amount of money over the life of your loan even if you only lose 2 or 3 percentage points.
Refinancing car loan when it is time
You may find it helpful to consult the following general guidelines when determining the best time to refinancing car loan.
A car loan begins within the first 60-90 days
- The manufacturer or previous owner generally has to transfer your vehicle title to your current lender for at least two to three months. When the title hasn’t been transferred, most lenders will not even consider a refinance application. By waiting, you will be able to apply for credit to more lenders and be considered for more loans.
- As a result of the hard inquiry on your credit report during the original application process, your credit score may have temporarily dropped. A higher interest rate may be the result. A FICO score of 690 or above is good credit, so wait for your score to recover until you have good or excellent credit (a FICO score of 690 or above).
Having a car loan for at least six months
- If you want to reduce the monthly payment and interest rate of your loan, you should wait at least six months into your loan term, so that your credit score has time to recover from any temporary drops.
- If this is your first car loan, or if you’ve experienced credit issues before, wait at least one year before refinancing. By doing so, you will ensure that you pay on time in the future. Several lenders will consider refinancing applications once you’ve made on-time payments for between six and 12 months.
The car loan has been outstanding for at least two years
- To qualify for auto refinancing, you must have a loan at least two years old. Compared to interest paid early in a loan term, refinancing late in the loan term has fewer savings opportunities.
- In addition, you’ll have to refinance your loan later, which most lenders require. You may be asked for different information, depending on your lender, such as how many months are left on your loan term, how much is outstanding on the loan, and the age of the car. Make sure you ask the lender about their specific refinance requirements before applying.
