Refinancing a car loan isn't particularly hard. There are a couple of decisions you will need to make. Decisions like:
- Are you increasing the amount borrowed?
- Are you lengthening the payoff time?
Regardless of whether you are keeping the same loan value or increasing the loan amount and taking cash out, you should probably find out what the book value of your vehicle is worth. Websites such as Kelly Blue Book can help you determine what the book value is. Try to be as accurate as possible when filling out the form. The bank will use your vehicle ID number - or VIN - to determine exactly what options you have on your vehicle, but you want to be as prepared as possible in advance.
If you have paid on your existing loan for a while and just want to lower payments, you can refinance to lengthen the payoff time. However, be aware that choosing that option may actually cost you money over the long term - even if you get a lower interest rate!
Most people are just looking for a better interest rate. If you refinance and choose a term similar to the amount of time you have left to pay, you will have made a smart choice and saved yourself some money!
Unlike mortgage loans, car loan refinances don't usually have documentation fees. So the biggest issue really comes down to finding the best interest rate. There are a number of places to look for a new lender. A few are listed below.
- Credit unions - Also check to see if your credit union will offer a lower rate if you have more than one service with them.
- Online lenders
- Your company's Human Resource department. Some companies have an agreement with specific lenders to offer additional rate reductions to employees. It never hurts to ask
- Various membership organizations. Organizations like AAA and AARP, as well as retailers like Costco, will sometimes offer rate reductions to specific lenders as well.
The biggest issue you may have is whether you have enough value in the vehicle to finance the amount you want. That's why it is important to get an idea of what the blue book on your vehicle is worth. If your vehicle is now worth $10,000 and you still owe $15,000, you may have trouble refinancing the loan. You may find a few lenders that will be willing to do it, but you may be more limited on your options and you may not be able to get the best rates. Again, shopping around is really the key. Know your facts - such as the blue book value - and shop around!