Since the end of 2008, and until U.S. unemployment and inflation rates drop and stabilize, the Federal Reserve is holding interest rates at historical lows, allowing financial institutions to offer appealing rates for new and used car loans. This regulatory climate also means that refinancing a car loan is a wise idea for people with existing loans at higher interest rates.
Refinancing auto loans is easier than many people might think. The application process is generally quick, taking no longer than 15 minutes, and many financial websites offer the ability to compare rates for multiple lenders who can compete for your business. When refinancing a car loan, be sure to follow Autobytel’s top 5 auto loan refinancing tips.
Tip #1: Know Your Credit Score
Before you try to refinance your car loan, you need to know your credit score. This is particularly important for people who may be in a more or less advantageous financial position than they were when the current car loan was finalized.
If you know that your financial situation and your credit score have improved since your current car loan paperwork was originally signed, you should be able to get a lower interest rate on a new loan. If the opposite is true, it is more likely that a car owner will have a difficult time in obtaining a lower interest rate. That said, people who are currently in financial trouble should still explore their options for refinancing an auto loan as one way to get household finances under control.
Additionally, knowing your credit score in advance can help people who are refinancing a car loan to avoid being taken advantage of by an unscrupulous lender that might attempt to charge a higher interest rate and justify the higher rate by claiming the loan applicant has imperfect credit.
