How to Refinance a Car Loan

Application form for car loan and key on wooden table, close up

If you’re looking to reduce your monthly payments on your car loan then refinancing might be an option worth pursuing. Here at Land Rover Monmouth, our financing department will guide you through the process of deciding which refinancing option is best, and ensure that you have all you need to learn the best way to refinance your auto loan.

How Do You Refinance a Car Loan?

The object of refinancing a loan is to reduce the cost of the monthly loan payments by reducing the loan’s interest rate. The first step is to review the terms of your current loan in order to confirm the monthly payments and the interest rate. You should then:

  • Find Out Your Credit Score: Your credit score is an important factor in your ability to refinance the current loan. If you are paying your bills on time, then you should have a high enough score for the loan application to go through fairly smoothly. It is possible to finance a car with bad credit, but it isn’t always easy.
  • Apply for Loans: You should shop for the best interest rate by applying to several financial institutions. Make sure that your applications are all submitted within a 14 day period to minimize any impact on your credit score.
  • Consider Loan Offers: Take time to evaluate each offer based on any upfront loan fees, new monthly payments, and any other additional charges. If you’re having trouble getting approved, learn a little bit more about in-house financing car dealers.
  • Decide Short Term or Long Term Loan: A long term loan usually has a lower monthly payment but costs more over the entire loan length. The monthly payments on a short term loan are higher, but you will pay less in total amount by loan’s end.

What to Know When Refinancing Your Car

Before refinancing your vehicle, there are certain factors that you should be aware of that may or may not affect your final decision to refinance. Pay attention to:

  • Additional Costs: Some loans carry penalties for early pay off so you should check your documents to see if that is the case with your current loan.
  • Amount Owed on Current Loan: If you owe more on your current loan than the vehicle is actually worth, expect some difficulties in being approved for refinancing
  • High Mileage and Older Vehicles: If you are driving a vehicle that has high mileage or is more than 6-7 years old, many institutions will refrain from offering a refinancing deal

Discover More About Your Financing Options at Land Rover Monmouth

If you have questions about the circumstances we have discussed above, please contact the professionals at our finance department who have experience in negotiating their way through some of the pitfalls of refinancing a vehicle loan. While you’re at it, check out our complete guide to financing a car.

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