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Quick tips for how to refinance your car loan
The following is part of a broader series meant to share tips and trends around the Automobile industry presented by Chase Auto Finance.
Melissa Ovale was looking to refinance her car loan, mainly because the current interest rate was so high. The Long Island, New York, resident recalls receiving many refinance offers—including from lenders that wanted to extend her loan, but barely lower her interest rate. Finally, one lender offered a lower interest rate—and only one extra payment. "I was pre-approved, too," Ovale recalls, adding: "Which made it easier." Soon, Ovale went from paying $520 a month, to $400.
Many people are familiar with the idea of refinancing a mortgage to save money each month by lowering their payments. But when it comes to a car, SUV or truck, refinancing usually doesn't come to mind as on option to potentially lower monthly expenses.
Refinancing a vehicle could help you save money. "There are 15 million U.S. households with auto loans," says Jim Manelis, head of Chase's Auto Direct business, which was implemented to simply the car buying process. "And most people don't know they can refinance their car with most banks and possibly get a better deal."
Here are some things to consider if you're interested in refinancing your vehicle loan.
Top reasons to refinance
- Possible lower rate – You may be eligible for a lower rate if the market has changed, or if your credit score has improved, since you purchased your vehicle.
- Convenience – You can move your accounts to a single bank, or lender, for ease of use and consistent service from your known neighborhood banker.
- More choices – You can re-evaluate your loan terms and pick features that work best for you—whether it is lowering your monthly payment, or spreading your loan over more months . If you decide to refinance, you may be able to lower your monthly loan payment or reduce your annual percentage rate (APR). But keep in mind that if you choose a loan term that is longer than the term left on your existing auto loan, you will pay interest over a longer period of time— and the overall cost of your loan may be higher.
Is refinancing right for you?
You may want to think about refinancing your current vehicle loan if:
- Your credit score is good or has recently improved.
- You have more than a few months remaining on the loan and have lower than average mileage on your car.
- You have a high interest rate on your current loan.
- Your bank offers an additional relationship rate discount.
Here's how refinancing works
- You apply to refinance with a bank, such as Chase or another lender. You'll need to have information ready about your current loan and vehicle.
- Your lender will review your credit history, verify your income and determine the current value of your vehicle. Your application may be approved or denied based on this information.
- Once you're approved, your bank will contact you with details about your new interest rate and monthly payment.
- If you're happy with the terms and the payment amount fits within your budget, you'll sign the paperwork for your new loan.
Your bank or lender will work with you throughout the process to help make your experience a smooth one.
Ready to see if refinancing is right for you? Visit Chase's auto refinance page.
Dawn Allcot is a writer whose work has appeared on Forbes.com and Mint.com, among other media outlets.