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Are you tired of higher payments every month? Is it getting difficult to manage your auto loan? Are you still thinking of a way out?

You are not alone. There are many caught in the vicious web of high interest-high payment loans. But, you can change your situation by refinancing your car.

It is essential that you refinance your car loan ASAP. The reason is that loan payments are designed in such a way that most of your early payments are directed towards the interest amount. So even if you are paying your interest regularly, most of it will not reduce your principal amount.

Risk comes from not knowing what you're doing. – Warren Buffett

I understand your doubts regarding car loan refinancing. But, you must understand that anxiety stems from unawareness. So without wasting any time, let's understand the entire process of refinancing.

First Improve Your Credit Score

Even though there were few lenders who offered bad credit refinancing in the past, the economy has taken a toll on everyone. Lenders are apprehensive and consider someone with a bad credit score as an extremely risky proposition. Here, you must improve your credit score.

Make payments on time. Do not apply for unnecessary loans and bring down the number of inquiries on your credit report.

Also check your credit history for any error or entries which you are unaware of.

Car's Value

Your car depreciates every single day and so it is important that you calculate the exact value of your car. Most lenders will rely on the value expressed in Kelley Blue Book. Check the value of your car and see if you do not have an upside-down loan. An upside-down loan means you owe more than your car's value. If you have such a loan, then refinancing your car will be difficult.

Also, lenders want you to refinance for at least $ 7,500.

Ask Your Current Lender

Check if your current lender is interested in refinancing your loan. If he is ready, it is essential that you still search for other lenders who may be willing to offer competitive rates.

Apply For Refinance

Banks, financial institutions, individual lenders, etc. Are few sources of auto loan refinancing. You can search for several lenders using the web. You will not have to go places and your work will be easier with the help of internet.

All you need to do is fill an online application form. Fill the exact same name as your current loan and also write the car loan account number. This is crucial as it will help lenders identify your loan.

You will be asked details about your car like the year of manufacture, accident history, etc. The lender will also be interested in your financial stability. Other than your credit score, your monthly income and current debts are also important factors.

Once you are approved by a lender, verify that the new loan amount is lower than the resale value of your car. This will be beneficial if you decide to sell your car and pay off the loan.

Do not compare the loan on a single parameter of lower interest rate. It must have a lower APR too.

It will be excellent if you get a loan at lower interest rates and without extending your loan term. It does not make sense in lowering your monthly payments and extending your loan period. It will only increase the risk of upside-down loan.

Fees Associated With the Refinance Agreement

Every lender has different rules and so the fees charged by them also vary.

There may be some lenders who will not charge any transaction fees. So, you only have to pay the usual Transfer of Lien Holder Fees or the Title Transfer Fees ($ 5- $ 10) and the State Re-Registration Fees ($ 5- $ 75). These fees are usually added to the principal amount.

Also check for any pre-payment penalty. Your current lender may pose a penalty or charge a fee for paying off the loan early. If the penalty amount is huge, you must think over your decision.

Skip A Payment?

This is a surprise benefit. Your new lender will take some time to process everything, so during that period you may get to skip a payment.

But to skip it, you must receive a welcome / agreement letter from the new lender. It is essential that you ask for permission to skip a payment. If he denies it, make sure you make the payment on time. Do not worry about your payment getting lost amidst all this; It will be applied to your refinanced loan only

Complete the Documentation

Do not worry about the huge paperwork associated with refinancing. There are only a few documents required while refinancing your car.


Your contract will include all the terms and conditions of the new loan. Ensure that all the promises made by the lender are fulfilled in the agreement. Read the fine print and understand every term. If you are confused about rates and percentages, use online tools and calculators.

Payoff Letter

When you refinance, the title of the car is transferred to the new lender. You will have to instruct the old lender to send it to the new lender.

Registration and Title Documents

After refinancing your car, you will have to re-register it with the DMV. So, sign all those documents related to registration and title transfer.

Proof of Insurance

Lenders will demand a copy of your car insurance to verify that you have sufficient insurance on your vehicle.

Proof of Income

Your proof of income will ensure the lender of your affordability and ability to make regular monthly payments. You can submit your recent pay stub as a proof.

Proof of Address

Lenders want to know your house address, so that they can contact you anytime they want. Usually a copy of your driving license will be enough but you can also use a copy of your rent receipt as proof.

Authorization To Validate Employment Details

The lender may be interested in verifying your employment details with your boss and seek authorization for the same. So, you will have to sign an authorization letter for the lender.

The documentation process will not take much of your time. An hour or so and you will have a refinanced car loan. Lower monthly payments will then be reality for you.

This brings us to the end. I hope this article helped you understand the intricacies of the refinance process.

So, refinance your loan and drive your car with ease.

Happy Saving !!!


Source de Rock Watson

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