You may know about the benefits of refinancing a mortgage, but did you know that you can also refinance an auto loan to lower your interest rate and potentially reduce your monthly payment? Thomas Lazenby, Senior Vice President of Regions Bank Dealer Financial Services, suggests asking these questions before your refinance an auto loan.
1. Under what circumstances might you consider refinancing an auto loan?
- You weren’t offered the lowest interest rate on your original vehicle purchase
- Interest rates have dropped since your original loan date
- Your credit score or financial health has improved since you first applied for an auto loan
- You currently lease your vehicle, and you want to purchase it
2. What factors could make it difficult to refinance an auto loan?
- If your credit score has declined, you may not be able to lower your rate
- If your vehicle valuation is less than the amount you owe, you may not be able to lower your rate
- If you have a history of delinquent payments, you may not receive loan approval
3. What should you consider before refinancing an auto loan?
- Increasing the term of the loan may change the total costs overall
- Some existing loans may include a pre-payment penalty or early-termination fees
- Refinancing your auto loan may change or void any warranties, service contracts, or other related products that may not be covered under a new loan
4. What steps should you take to start the process?
- Collect all your original loan documents
- Check your credit history
- If you’re changing lenders, call you current lender to find out the payoff amount
- Update the valuation of your vehicle using Regions Auto Center, Kelley Blue Book or National Appraisal Guides
- Use a loan calculator to determine the interest rate and term you will need to save money on interest
Finally, Lazenby recommends that you consider refinancing with your current lender, who may be able to lower your rate.
If you think you may benefit from auto financing, talk to your lender about your options.