Refinancing a car loan can be a great way to save money every month on your transportation costs. By following a few simple steps, you can reduce the cost of your auto loan. Before you begin the process of refinancing, it is important to know how much your car is worth. Use a website such as www.kbb.com to find out it’s blue book value.
While the exact value of your car will need to be determined by a bank appraiser, an online estimate will allow you to determine if you have enough equity in the vehicle to be eligible for a refinance. If the blue book value of the car does not meet or exceed the amount you still owe on your existing loan, a bank will probably not finance the car for you without bringing additional money to the table.
If the car’s value is more than what you owe,however, you should begin shopping around for interest rates. Be sure to check rates at several banks. Ideally, start by calling local banks or getting online quotes. While many banks will give you a range of rates dependent on your credit score, you should be able to ascertain if a refinance is a good idea by comparing these rates to your current interest rate.
If it still seems favorable to go ahead with the refinance, pick the banks with the best offers from your list and have them pull your credit in order to give you an exact interest rate and monthly payment amount. Only inquire at a few banks, because each inquiry can lower your credit score by about one to five points. Once you have decided on the bank you want to refinance with, it is time to apply for a loan. While this is usual a relatively simple process, carefully consider the overall amount of the loan you are applying for.
If you have extra equity in the vehicle, it is possible to take some of the cash out and refinance the total value of the car. This cash can be used for a major purchase or to pay off higher interest debt. If you choose to do this, of course, be sure that you can meet the higher payment amounts. It will usually take about theory days for the new loan to take effect. During this time, be sure to pay on your old loan until you are sure it has been paid off. Many people have made the mistake of assuming the old loan has been discharged and have ended up with a reduced credit score as a result.