How Soon Can I Refinance My Car Loan After Purchase

Disadvantages Of Refinancing A Car

• You might pay refinancing feesAuto refinancing can include a variety of costs, including application, origination and title transfer fees. However, not all lenders charge the same fees and some may not charge any at all. When comparing refinancing options, read the fine print and factor in all associated fees. Paying too much to refinance your car loan could cost more in the end than staying put in your current loan.

• You could pay more overall interest over the life of the loanIts true that getting a lower interest rate can save you money. But if you extend the term of the loan, you might pay more interest over the life of the loan. For example: If you currently have a $10,000 loan with a 20% interest rate over a 36-month term, youll pay $3,378.89 in total interest. If you refinance that same $10,000 at a 15% interest rate for 60 months, youll pay $4,273.96. Thats almost $900 more.

However, paying extra interest over time may be worth the convenience of lower monthly payments. It all depends on what makes sense for your financial situation.

How To Save Money With Car Loan Refinancing Calculator

Use the automatic refinancing calculator to find potential savings. Bankrate’s automatic refinancing calculator can help you determine how much money you’d save on interest, monthly payments, or even both at a new rate. To use it, enter your current loan details: your monthly payment, balance, interest rate and remaining term of the loan.

How Does It Work When You Refinance Your Car

With a refinancing, such as a purchase loan, your car serves as collateral for the debt. This means that if you can’t repay the loan, your lender can take the car and sell it. The value of your car must be higher than the loan amount otherwise, the lender will lose money in the event of bad debts.

Auto loan credit score

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How To Refinance The Right Way

Most borrowers that refinance are looking to get a lower car payment. The majority of others are looking to reduce their interest rate. Refinancing can be a great way for borrowers to save money on their car loan both monthly and long term.

However, you may have the option of just extending your loan term to get a lower payment, but be advised, this means paying more for the vehicle.

Nearly every auto loan out there today uses a simple interest formula. This means your loans balance and interest rate determine how much interest you pay the lender over time. Simple interest means your interest charges accrue daily, and the higher your loan balance and longer your term, the more you pay.

If youre looking to save your car loan, then trying for a lower interest rate is the way to go instead of just extending your loan term.

How To Get A Car Loan After Bankruptcy

If you have a bankruptcy on your credit report and are looking to get a car loan, heres how to increase your likelihood of success.

1. Check your credit.

Your credit score was likely impacted by the bankruptcy proceedings , but make sure there are no errors on your credit report that could drag your score down even further. According to the Fair Credit Reporting Act, you can access a copy of your credit report for free every 12 months from each of the credit bureaus Experian, TransUnion and Equifax. AnnualCreditReport.com is the only federally-approved website that provides access to all three reports, which are currently being offered weekly.

2. Set your budget and save for a down payment.

Experts advise that you dont spend more than 10% of your budget on transportation costs. Car loan calculators can help you identify how much car you can afford and what your potential car payments will be. Saving for a down payment will also help you get more favorable terms. Experts generally recommend putting down 10% or higher to help you get the best rates and prevent your car loan from going underwater.

3. Compare cars.

Once youve identified your price range, look for vehicles that are practical for your lifestyle. Since your budget and credit score will be top of mind, you might have the most luck buying a used car versus a new one.

4. Shop around for lenders and get preapproved.

5. Review and sign the paperwork.

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Keep The Status Quo During The Process

Related: Ten commandments for travel rewards credit cards

Will applying for a travel rewards credit card before closing on your purchase or refinance disqualify you from obtaining the financing? he said. No, not necessarily.

However, Karetskiy says it could. And it will likely cause more work, time and stress for both you and your loan officer.

The lenders job is to make a yes-or-no decision on an applicants request for credit based on the applicants current and past two-year income, credit and asset history, he continued. It is in the best interest of anyone requesting credit to keep the status quo on everything related to their qualifications, most importantly, their credit.

Brian Rubenstein, senior director with Ally Home, says applying for a new credit card before you sign on the dotted line for your mortgage could place you under more scrutiny during the loan review and underwriting process.

Theyll need to be prepared to provide more documentation to help the lender fully understand the debt obligations associated with the card as part of the borrowers overall financial picture, he said about home buyers.

In short, opening a new credit card just adds an additional item that must be checked out during the home mortgage process, he said.

Waiting Too Long To Refinance

If you run the numbers and you determine that it makes sense to refinance, waiting can cost you. Rates are typically lowest on new vehicles, and some lenders wont refinance loans for cars over a certain age . You might even get a new car rate if you refinance immediately after purchasing from a dealer and taking advantage of dealer incentives. Used car loan rates are typically higher than new car rates.

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Wait To Not Be Underwater

Unlike homes, cars tend to depreciate over time. This is especially true with new cars because theyre considered used as soon as you sign the paperwork.

If your loan repayment term is longer than 60 months , you run the additional risk of your car losing value faster than you can pay it off. This is one reason why you should think long and hard before you buy an expensive car and justify the purchase because you were able to stretch out the payments.

Lenders want to know that theyll see a return on their investment, which is why a car loan is a secured loan. Secured loans require collateral. And in this case, the collateral would be your car.

If you find yourself owing more on the car loan than what the car is worth, that means youre underwater on your car loan, and lenders may not be willing to refinance.

How Soon Can I Refinance After Buying A Car

Is there such thing as refinancing a car loan too early?

Unless you pay for your new car in cash, youll likely take out a car loan. When you do so, know that you dont have to commit to your initial loan forever. There may come a point where you want to refinance your auto loan to accommodate your new needs or priorities. But how soon can you move forward with a refinance after you buy a car?

2021 Auto Refinance Rates

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Look Into Multiple Types Of Financing

When you first borrowed money to buy a car, it may have been through dealer-arranged financing. However, many banks, credit unions and online lenders offer direct financing to car buyers and owners.

In general, its best to start with the financial institutions you already work with. In some cases, you may qualify for a loyalty discount based on your existing relationship with the bank or credit union.

Dont stop there, though, even if the terms are excellent. Take some time to compare that quote with rate offers from other banks and lenders. This process can take some time, but the more options you compare, the higher your chances will be of getting the best auto loan terms available to you.

Figure Out Your Current Loan

Start by determining the rate on your existing loan and finding out how much you still owe. Its also wise to get your current credit score so youll have some idea about whether youd qualify for lenders advertised top rates. Dont forget to check for special deals. And remember that if you have a late-model vehicle, you may be eligible to refinance at a lenders new car rate, instead of higher used car or general refinancing rates. So check that, too.

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How Soon Can You Refinance A Car Loan

The general rule of thumb is to wait at least two years before refinancing a bad credit car loan this is the best time to refinance an auto loan. The reason why is because lenders like to see a payment history with the car loan to see how you’ve managed it. Plus, two years gives you plenty of time to improve your credit score, which can help you get a better interest rate.

How Soon Should I Ask To Refinance My Car Loan With Bad Credit

And it can’t hurt to buy: Based on the credit report template, any car loan application submitted within a specified period of 14 to 45 days is considered an application. Next Steps Automatic loan refinancing can help you access new payment methods that better suit your needs.

How to refinance my car

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Have Your Mechanic Check It Out

If you get serious about a used car from a private seller, ask if you can have your mechanic check it over before you purchase. A reputable seller will be willing to let you do this, provided they can come with you to the appointment. If the seller isn’t willing to let you have your mechanic check the vehicle, chances are they are hiding something.

If you are considering purchasing from a private seller, review our blog on reasons why an extended car warranty is worth it.

Looking To Refinance Your Car Loan Here’s What You Need To Know

Many car owners don’t know that they can refinance their car loans. Doing so may let you get a better interest rate, shorter term, or lower monthly payment. If your current car loan is too expensive for your needs, or you want to pay it off more quickly, refinancing may be the option. Before you refinance, make sure you do your homework.

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Interest Rates Have Dropped Since You Took Out Your Original Auto Loan

Interest rates change regularly, so theres a possibility that rates have fallen since you took out your original auto loan. Even a drop of 2 or 3 percentage points may result in significant savings over the life of your loan.

Lets say your original auto loan was for $25,000,with a 7% interest rate and loan term of 60 months. If you keep this loan,youll end up paying a total of $29,702 on the loan. After a year of paymentson this loan, your balance is now $21,000. If you were to refinance and get aloan for $21,000 for the remaining 48 months with a lower interest rate of 5%,youd end up paying a total of $23,214 on your refinance loan. Combined withthe $4,000 you paid on the previous loan, youd have paid a total of $27,214 tofinance your car $2,488 less than if you had kept your original loan.

Rule Of Thumb Of When To Refinance A Car Loan

The bottom line is that, while there is nothing to stop you from trying to refinance at any time, it is generally better to wait at least a short period of time.

At IFS, we use the following rules of thumb to guide customers on when to refinance their auto loans:

• Wait at least 60-90 days from getting your original loan to refinance. It typically takes this long for the title on your vehicle to transfer properly, a process that will need to be completed before any lender will consider your application. Refinancing this early typically only works out for those with great credit.
• Consider refinancing after six months. If you have fair to great credit, you will begin to have refinancing options after this length of time.
• If you are a first-time car loan borrower, wait at least a year to refinance your loan. A first-time borrower typically needs to build up a good car loan payment history before refinancing.

Before you jump in, it might be a good idea to think about what you hope to get out of refinancing. We did a full write-up detailing three reasons you might want to refinance. Additionally, read our guide covering what refinancing might do for you.

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Determine The Change Different Interest Rates Make

If you are shopping for different loans, a car loan calculator lets you see the difference they will make on your monthly payment and the overall cost of the loan. Even a change of just one percent can add up to big changes. Using a car loan calculator will show you those changes quickly, and this may motivate you to shop harder for a different loan.

When Should I Refinance My Car Loan

The best time to refinance your car loan is when it can save you money in the long term, but it may also help if youre hoping to catch a break on your monthly payments. Here are a few situations where it may make sense to refinance:

• Refinance car loan rates have gone down: Most car loan interest rates fluctuate based on the prime rate and other considerations. If you purchased your car a while ago, its possible that car loan rates have decreased since then.
• Youve improved your credit score: Even if market rates havent changed, improving your credit score may be enough to get a lower rate. The better your credit, the more favorable loan terms youll receive. If youve improved your credit score since signing for your initial loan, you may qualify for better loan terms.
• You got your initial loan from the dealer: Dealers tend to charge higher rates than banks and credit unions. If you took out your initial loan through dealer-arranged financing, refinancing directly with a lender could get you a lower rate.
• You need lower monthly payments: In some cases, refinancing a car loan may be your ticket to a more affordable payment, with or without a lower interest rate. If your budget is tight and you need to reduce your car payment, you could refinance your loan to a longer term . Keep in mind, though, that while you will pay less per month with this strategy, you can expect to pay more over the life of the longer loan.

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When Can You Refinance

You do not need to wait any minimum amount of time before refinancing your car loan. You just have to meet all the requirements for the new loan to refinance. Refinancing is possible immediately after buyingeven before you make your first monthly payment. Just be sure that you actually end up with a better deal, and that refinancing doesnt cause you to pay more for your vehicle.

In some cases, you may be unable to refinance until you have documentation from your states Division of Motor Vehicles . Gathering registration details may slow you down somewhat.

Refinancing Soon May Be A Good Idea

While auto refinancing isnt right for everyone, it is a smart financial move for many. It can allow you to save money on interest, lower your monthly payments, or pay off your car sooner than you ever thought possible. If you decide to refinance soon, be sure to compare lenders, rates, and terms so you can score the best loan for your unique needs.

Ready to refinance your car loan?

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What Is Bank Of America’s Current Apr For Refinancing A Vehicle

Bank of America’s current annual interest rate for vehicle refinancing makes sense if you’re repaying your existing loan with new funds to save on lower monthly payments, lower interest rates, or cash. Compare prices and use the car loan calculator to see the savings. Read their full Bank of America review.

How Msrp Helps Buyers

The MSRP is a good tool to use to compare vehicles and to apply for your loan. It gives you a ballpark for what the vehicle will cost, and allows you to compare the cost of similar vehicles to each other. While it may not be your out-the-door price, it is a good benchmark to use as you shop.The MSRP also gives you a starting point as you negotiate. If the dealer is highly motivated to sell, they will negotiate below this benchmark. However, you may actually pay more than this price. If you’re shopping for a vehicle that’s in high demand, the dealership can put an asking price on it that’s higher than the MSRP. Remember, MSRP is nothing more than a suggestion.

For more information on how the recommended selling price impacts your car loan application, review our blog on the MSRP meaning and how you can prepare for negotiations at the dealership.

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