Does Refinancing A Car Loan Hurt Your Credit Score
Generally speaking, every time you apply for a car loan in Australia including when you refinance an existing one your new lender will perform a credit check on you before deciding whether to approve or decline your application. This will typically involve looking into your borrowing history to try and work out how reliable you are as a borrower. As with any loan application, it may hurt your credit score if you make too many applications within a short space of time or if you miss any required repayments on either your old or new loan.
The better your credit score is, the more likely it is you will be approved to refinance with your chosen lender. Many lenders also reserve their cheapest rates for borrowers with a high credit score. You can check your credit score for free with Canstar.
Consider The Following Factors Before Doing A Transfer
Compare Interest Rate You need to check the interest rate the new bank offers to you with the existing rate of interest. Because, if there is not much difference between the two, it wont help you save much. The difference in interest rate has to be a minimum of 3%-4% while you are looking to transfer your personal loan balance. In the case of a home loan, though, even a difference of 0.25%-0.50% can bring significant difference to the repayment because of the longevity of this loan
Prepayment fee of Existing Lender & Processing Fee of the New Lender- The user must calculate the prepayment of the balance amount and see how much he/she will save with that to compare it with the balance transfer. Because, if the new bank charges high fees from you, the transfer wont benefit you and the repayment remains the same with no or minimal savings.
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Transferring Mortgages And Car Loans
Mortgages and car loans are unlike other types of personal loans in that they can be transferred. However, they can only be transferred to another borrower under certain circumstances. For one thing, the new borrower must be able to qualify for the loan. If its a mortgage, they will need to requalify, which means having a credit score equal to or greater than the original borrowers.
A transferrable mortgage must be assumable, which means that the loan agreement allows for the debt to be transferred to another person. Not all mortgages meet this criterion in fact, such mortgages are rare. However, a new borrower can start over with a brand new mortgage, which the new borrower would use to pay off your mortgage. They would then have a lower mortgage payment and potentially a shorter repayment period.
It is somewhat easier to transfer a car loan to another person, either with the same lender or a new one. If the new borrower can qualify for the car loan, the lender may agree to transfer the loan into their name. However, the new borrower may prefer to get a new car loan from another lender. The new lender will pay off your car loan, and the new borrower will benefit from lower payments and a shorter repayment period.
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Five Things You Must Know While Transferring A Car Loan To Another Lender
3 min read.Navneet Dubey
- The eligibility criteria for a car loan balance transfer vary from lender to lender
- To get your car loan transferred smoothly, you need to submit a loan statement from your current lender with details about the outstanding principal and interest amount, tenure etc
With banks offering attractively priced car loans, owning a car is affordable and convenient. But what if after taking a car loan, you realise there are better loan options? You have the option of transferring your loan to a new lender of your choice.
This process of transferring your existing loan to another lender is called a car loan balance transfer. Each lender has different terms and conditions for such transfers. It is a simple process wherein after you have applied for a loan transfer, the new lender will clear your existing loan with your previous one and the EMI payment process begins with the fresh lender. Here are five things to keep in mind before a balance transfer,” said Adhil Shetty, CEO, BankBazaar.com.
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Check if you are eligible
Sujay Das, Chief Risk Officer, MoneyTap – Bengaluru based Fintech firm, said, “Firstly, the new lender will check a few points. To begin with, they will verify the cars condition and the persons risk profile. They will check if the borrower is eligible for a loan and will look into details like accident history, make, and model of the car.”
Assess the costs
You Cant Afford Your Car Loan Payments
Refinancing typically offers the option of extending the loan beyond the original ending date. That, along with any reduction in your rate, can reduce your monthly payments. But a longer term will also eat up some or even all of the savings from a lower refinancing APR. As a last resort, you also could consider cash-out refinancing, in which a lender will refinance your loan and give you cash up to and in some cases more than the difference between the amount you owe and the vehicles value, if higher. But such borrowing is extremely risky, especially since youre already in a pinch.
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Launch Of Maruti Suzuki Special Edition Dzire Prices Start From Rs556 Lakh
The 2018 Maruti Suzuki Special Edition Dzire has a wide range of additional features, including wheel covers, power windows, and rear parking sensors. The car also has remote central locking facility and a Bluetooth-enabled music system. Other significant features of the vehicle include ABS, brake assist, and dual front airbags.
The car will continue to be made available with the 1.2 litre petrol engine and the 1.3 litre diesel motor. The petrol engine generates 82 bhp of peak power and 113 Nm of maximum torque. The diesel motor will juice out 74 bhp of peak power and 190 Nm of maximum torque. The engines are both coupled to 5-speed manual transmissions.
14 August 2018
Ask About The Bank’s Account Switching Resources
Some banks offer account switching services that take the burden of account switching off of your plate. For example, the bank might handle the transfer of your automatic payments and direct deposits, and it may even notify your old bank to close the account. It’s worth inquiring with your bank about their account switch services to make the switch as easy as possible.
Even if your bank doesn’t offer this service, they may still offer a switch kit. This information packet will have all the key information you need to complete the switch, such as your new account and routing number for direct deposit forms.
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How To Upgrade Your Car When You Still Have A Loan
Whether its a change in lifestyle, accident damage or a great sales deal, there are times when changing cars is a major priority. But what happens if you want to get a new car when youre still paying off your old one?
When you first take our a car loan, you sign a legally-binding contract and agree to pay back the full amount, including interest and fees specified in the product disclosure statement. That means you will have to deal with this loan if you want to buy another car and trade-in or resell your current one. As insurance company Allianz explains on its website:
If you fail to repay a secured loan, the lenders are entitled to repossess and sell your car as a means to cover their losses. If the vehicle sale doesnt cover the full amount of the loan, you will have lost your car and still have money owing.
The above scenario is exactly what we want to avoid. But paying off the existing vehicle and a new one is also something most people want to avoid especially when you could get a better price for a new car by reselling or trading in the one you currently drive.
In most cases the ideal outcome is to get rid of the existing loan and get a new one to suit your new car. In order to do this, St George says the existing loan needs to be paid out in full at or before time of sale .
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The New Loan Holder Applies For The Loan
At this point, the new loan holder has to apply individually for the loan. If its you, its essential that you know you cant just transfer the loan to yourself from yourself.
If the loan holder is applying to your same lending institution, theyll need to fill out a new application with the same terms and conditions of your current loan agreement. In some instances, your lender may require them to cosign on your loan rather than giving them total control over the loan.
If youre refinancing your car through a new loan, youll also need to apply for that loan with your new lender. In other words, whoever is taking responsibility for the loan balance must be approved before any further considerations.
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Can You Transfer Your Mortgage To Another Person
If you bought a home with a 5-year mortgage, but after 4 years you decide you want to sell it, youll have three main options:
- Break The Contract You can sell your home by breaking your mortgage contract early, but youll likely have to pay a hefty penalty fee for it.
- Port Your Mortgage You can transfer your mortgage to your new property. This is often a good choice for those who are buying a new home while selling their old home.
- Transfer Your Mortgage You can transfer your mortgage to the buyer. However, for this to work, your buyer must agree to this agreement. This scenario is often ideal since the new owner will not have to take out a new mortgage, which may often come with a higher interest rate.
How To Transfer Your Mortgage To Another Person?
Before the mortgage can be transferred, the contract must stipulate that it can be assumed by someone other than yourself. A mortgage that is assumable means that the outstanding balance may be transferred to another individual.
In addition, the new owner will still need to get approved for a mortgage, which means the lender will still want to look into the buyers credit score, financial history, and income to make sure theyll be able to make the mortgage payments and be at low risk for default.
Alternatives To Transfering Your Mortgage
You May Not Qualify For A Top Rate
If it has only been a short time since you got your initial loan, your credit score still may be suffering from the temporary hit from a hard inquiry to your credit report, especially if youve also applied for other types of credit, such as a mortgage or one or more credit cards. Your refinancing rate may also be affected if you were late on or missed loan payments, or you havent had the loan long enough to demonstrate that youll consistently pay on time, especially if you dont have a long credit history.
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What Are The Alternatives To A Car Loan Transfer
If youre not yet sure if a car loan transfer is the best option for you, you may have to check out some alternatives.
- Car Loan Refinancing If you can no longer afford to make payments on your car loan but you still have a good credit score, you should consider a car loan refinancing. Getting your auto loan refinanced will allow you to get better repayment terms and maybe even lower interest rates.
- Sell The Car If you have accumulated a decent amount of positive equity in your car, you can sell the vehicle and use part of the proceeds to pay off your outstanding car loan balance. Plus, you can use the remaining amount to buy a cheaper car if you want to.
Option : Go To A Dealership
Dealerships and finance companies are usually closely linked. Salespeople and sales managers will understand the ins and outs of every possible finance situation and theyll be able to find a solution to your problem especially if it means they will sell another car!
For you, this makes the process simple but it will limit you to buying a car that the dealership can provide and using the finance firm that dealer works with. Of course, you dont have to return to the dealership you bought your car from youll be able to part-exchange your vehicle with any dealer.
When you look at part-exchanging, the person youre dealing with will want to know if theres any finance outstanding on the vehicle. Usually, theyll get a settlement figure on your behalf, before putting together a deal that pays off that finance agreement and sets up a new one.
They will compare the value of your current vehicle to the amount you owe. If you owe less than the value, the equity in the car can be used as a deposit for the next car. If you owe more or the same amount as the vehicle is currently worth, then you might find you need to put a deposit in to make an upgrade viable.
Ultimately, the dealer will put together a package thats as simple as possible. They will deal with paying off the old finance, setting up the new plan, and working out if any deposit is needed.
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Tips To Consider When Refinancing Your Car Loan
If you want to refinance your car loan and possibly save some extra money, thoroughly comparing your options and making sure you are aware of all applicable fees and charges attached to both your old and new loans could be a good start.
Here are a few other key tips to consider:
It might be a good idea to try Canstars car loans comparison tool if youre looking to compare your options for refinancing.
How Does The Loan Balance Transfer Work
The loan transfer process is simple: you just need to close your loan account first with the existing lender and then pay a transfer fee to your new bank. Your new bank will pay off the existing loan and you have to pay to the new lender in equated monthly installments at a new rate of interest.
For example, your existing personal loan of INR 6,00,000 comes at an interest rate of 14.00%. If you transfer the same to a new bank with a 9.80% rate of interest for the remaining tenure, youll save on EMI as well as interest. Here look at this table to see the difference.
So, from the above example, you know how the transfer will save your loan payments.
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What Happens When You Have A Cosigner Or Guarantor
Although a borrower cannot transfer the responsibility of a personal loan, another person can become liable for the remaining balance of someone’s personal loan when they take out the loan with a cosigner or guarantor. If you default on the loan, you make the cosigner or guarantor liable for unpaid balances.
Cosigners are every bit as legally responsible for the personal loan as the person to whom the loan is issued. While lenders need to prove they pursued the primary borrower extensively before contacting the guarantor, said guarantor is still responsible for any unpaid balances.
While you cannot transfer most personal loans to another person, some types are transferrable in certain situations.
What Are The Steps Involved In Transferring A Car Loan
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