If you are dissatisfied with your current loan, you may be interested in refinancing. With a car loan refinance, you can have better control over your debt and negotiate for better terms on your existing car loan.
Refinancing your car loan is a serious undertaking. Before delving in, you need to give it careful thought and consideration. Learn more about refinancing your car loan below and see if it’s the right move for you.
Understanding car loan refinancing
When you refinance a loan, you take out a new loan to replace your current one. After you are approved for a car loan refinance, your new lender will loan you the remaining balance on your existing car loan so you can pay it off completely.
With a car loan refinance, you could get a lower interest rate and a longer loan term to help you manage your repayments better. The terms and conditions of your refinanced car loan will depend on various factors like your financial situation and credit score.
The steps to refinancing a car loan are relatively simple. You need to review your current car loan, evaluate the value of your car, and analyse your financial situation thoroughly. After, you must prepare your application and compare car loans to find one that suits your needs.
Mechanics of refinancing a car loan
Car loan refinancing works similar to applying for a standard car loan. You will pay back the borrowed funds plus interest over the loan term. Instead of using the funds acquired from the loan to get a new car, you will be using it to pay off your current loan.
With arefinanced car loan, you can arrange for smaller repayments at a longer loan term to make it more manageable compared to your initial car loan. There are plenty of car loan refinance options available even for those with bad credit.
Top reasons why borrowers want to refinance their car loan
Refinancing a car loan can get complicated as you’re dealing with different lenders and loans. Even so, many borrowers still apply because it gives them more flexibility on their repayments and better terms on their loans.
Here are some reasons why borrowers opt to refinance their car loan:
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Save on monthly repayments. This is the primary reason people choose to refinance. It helps lower repayments to make them more manageable. Also, taking out a new loan with better rates could save you a lot of money down the line. Compute your potential savings with are financed car loan using our online repayment calculator.
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Remove or add co-signers. Sometimes the timing of your car loan is not ideal. Your financial situation may change drastically. When that happens, adding or removing a co-signer may be needed and getting your car loan refinanced is a way to make that happen.
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Move to a better lender. You may want to switch lenders who have better rates and don’t charge a plethora of hidden fees.
Eligibility requirements to refinance a car loan
Each lender has its own set of criteria and requirements when it comes to a car loan refinance application. You have todo your research or talk to the lender to learn more about your refinance options. Common requirements for a loan include:
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Personal information
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Proof of income
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Assets and liabilities
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Vehicle information
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Credit score
By having these documents ready beforehand, you can save time and get your car loan refinance application processed much quicker.
Pros and cons of car loan refinance
Weigh the advantages and disadvantages of refinancing your car loan. Make sure to consider the following before making your decision.
Pros of car loan refinance
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Lower interest rate – If you have a good credit score, the new lender will likely give a lower interest rate on the refinance loan compared to the first car loan. A lower interest rate will lessen your monthly repayments and help you save money on your car loan.
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Longer loan term – By getting a new term for the refinance loan, the loan amount will be divided by more months and therefore will lead to much lower monthly repayments.
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Ability to change loan features, terms, and policies – You can consider refinancing your current loan if you are no longer happy with the way it has set up. You can find a loan with features that match your current financial needs.
Cons of car loan refinance
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Pay more over the life of the loan – Extending your car loan’s term could mean paying more in interest payments overall, which would end up increasing the cost of the loan.
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Transaction fees – You may have to pay exit fees or penalties on your current loan.Opening anew loan couldalso mean paying for annual fees, admin costs, and the like.
Refinance your car loan with Aussie Car Loans
Refinancing your car loan can be beneficial with the right loan and lender. At Aussie Car Loans, our experts will help you find the best car refinance deal that will meet your needs perfectly. Call 1300 889 669 or apply online today!
FAQs
What is car loan refinancing?
Car loan refinancing is when you take out a new loan to replace your current car loan. Using the funds from the car loan refinance, you’ll pay off your previous car loan in full and then start making ongoing loan repayments to your new lender.
Why would I consider refinancing my car loan?
You should consider refinancing your loan if your financial situation has changed, if you want to change the terms of your loan, or if you’re unhappy with your current lender. Refinancing your car loan could also help minimise your repayments.
How does refinancing a car loan work?
Car loan refinancing works like a standard car loan. You pay back the car loan amount through regular repayments plus interest over the course of the loan term.
What factors should I consider before deciding to refinance my car loan?
You should consider the costs associated with car loan refinancing. The exit or termination fees of your current loan and the new fees you may have to pay on your new loan could cost a lot.
Can I refinance my car loan with bad credit?
There are car loan refinance options for those with bad credit. Talk to lenders or your broker to learn about the type of bad credit car loans available to you.
What are the potential benefits of refinancing my car loan?
The main possible benefit of refinancing your car loan is lowering your regular repayments. This can help make your repayments more manageable so you can better control your finances.
Are there any costs or fees associated with car loan refinancing?
You have to think about the exit or termination fees on your current loan. You may also have to pay for application fees and ongoing costs on your new car loan.
When is the right time to refinance my car loan?
It depends on your financial situation. The best time to refinance your car loan is when you’ve properly researched your options. Seek professional guidance by talking to lending specialists or a broker about your situation.
Will refinancing extend the term of my car loan?
It is possible that refinancing your car loan could extend your loan term. When you reduce your monthly repayments, you are also prolonging the loan term.
Can I refinance a car loan I co-signed with someone else?
You can refinance a car loan even if it was co-signed with someone else. On your new loan, you can either retain or remove the co-signee.
