If you’re thinking about refinancing your auto loan into a new loan, there are a few things you should know. First of all, refinancing a car can impact your credit score. Secondly, it can be very easy to get approved for refinancing if you have good credit and have been making timely payments on your current vehicle loan. Also, auto refinance prequalify is a good start if aiming for refinancing auto loan.
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As experts like Lantern by SoFi says, “A prequalified offer for refinancing a car may not be identical to the final one because the prequalification doesn’t include a hard credit check.”
What is auto loan refinancing?
Refinancing is when you take out a new loan to pay off an old one. You could refinance your car loan to get a lower interest rate or to get a longer loan term, which lets you make smaller monthly payments and save money in the long run.
For example, let’s say that you bought a brand-new Tesla last year for $75,000 with an interest rate of 4% over 60 months and were paying $923 per month on it. With refinancing, if your credit score has improved since then and got approved for another car loan with better terms, then you could take out a new auto loan with them and use those funds to pay off the original Tesla loan in full!
How does credit score impact auto loan refinancing?
If you want to get the best deal on your auto loan refinancing, it’s important to understand how your credit score can impact the rate that you’ll be offered.
Credit scores are used by lenders to determine whether or not they will lend money and at what rate. The higher your credit score, the less risk that lender sees in lending you money and thus they offer lower interest rates. Lower interest rates mean lower monthly payments and more financial flexibility for them in case something goes wrong down the road.
If your credit score is low or average (roughly 640-660), then chances are high that lenders will charge a higher interest rate than someone with excellent credit (720+).
Does credit score matter when refinancing a car loan?
If you are thinking about refinancing a car loan, you may be wondering how this will affect your credit score. Refinancing can impact your credit score in two ways: positively or negatively. If you have a good credit score, refinancing could help you get a lower interest rate and save money on monthly payments. But if you have bad or poor credit (also called “subprime”), getting approved for the new loan might be difficult or even impossible. And it could hurt your credit score.
How can you improve your chances of getting approved for auto loan refinancing?
As with any type of loan, there are things you can do to increase your chances of being approved for refinancing. These include:
- having a high credit score.
- having a high income.
- having a history of on-time payments.
- having a low debt-to-income ratio (the amount of monthly debt payments divided by gross monthly income).
- having a good debt-to-assets ratio (the percentage of total assets that are financed by debts).
You have gone through the main points that you need to know about auto loan refinancing.You should also be aware that there are some factors outside of your control that can impact whether or not you will get approved for refinancing an auto loan.
