Cant Make Your Car Payments
Having a car provides many conveniences. You do not have to worry about lugging groceries on the bus or waiting 45 minutes for the train. However, for those experiencing financial problems, having to pay a car loan can make owning a car seem more like a burden than a convenience. If you are behind with payments, or worried you will be soon, assessing your financial situation and actively pursuing your options can help you make the best of a difficult situation.
When Youre Not Underwater On Your Current Loan
Generally speaking, its easier to find a lender wholl work with you when your car is worth more than your remaining loan balance.
New cars can lose about 20% of their original value within the first year, and an average of 15% to 25% each of the next four years, according to Carfax. So time is of the essence.
Some lenders wont even consider refinancing an older car. Capital One, for example, only refinances loans for vehicles that are seven years old or newer.
If your car is relatively new and still has equity, now could be a good time to refinance.
If I Shop Around For Rates Will That Hurt My Score More
A common misconception is if you shop around for rates and have your credit pulled multiple times, this will hurt your credit score beyond doing just a single application.
This is not true. The credit scoring agencies of both FICO and Vantage are aware this is happening, and they encourage borrowers to shop around. Making multiple hard inquiries within a few weeks span will behave as one single credit pull as far as your score is concerned.
Also Check: What Kind Of Loan Do I Need To Buy Land
Carefully Consider Your Options Before Refinancing
Refinancing your car loan can be a good idea in some situations, but not necessarily in others. If you’re thinking about replacing your current loan, make sure you understand your reasons and options.
Start by checking your credit score to see whether you’ve made progress since you first got the loan. Then consider why you want to refinance and what potential drawbacks and costs are associated with the process. Then compare auto loans based on your credit score to determine whether refinancing can save you money or if it might end up making things worse.
There’s no one-size-fits-all answer to whether refinancing is right for you, but following this process can help you come to the right conclusion.
How Refinancing Affects Credit Scores
Virtually every time you apply for a loan, the lender will run a hard inquiry on your credit report. According to FICO, this inquiry can knock as many as five points off your credit score temporarily.
Multiple hard credit inquiries can have a compounding negative effect on your credit scores, but if you apply for multiple auto loans within a short periodtypically 14 days but sometimes longerthey’ll all count as just one inquiry when calculating your credit scores and won’t have a negative impact.
When the lender opens a new credit account in your name, it could affect your credit scores again because it reduces your average age of accounts, a factor that influences the length of your credit history.
In both cases, the potential negative impact on your credit is typically minimal and temporary. If you start missing payments on your new loan, however, it could have a bigger and longer-lasting impact on your scores.
Read Also: How To Get Better Interest Rate On Car Loan
Servicemembers Civil Relief Act
The SCRA provides financial relief and protections to eligible servicemembers and their dependents. PNC is grateful for your service and we would like to help you understand your benefits and protections under SCRA as well as other similar benefits that PNC may be able to provide to you.
To find out more, please contact us at:
Is A Refi The Right Choice For Me
If you have a high interest rate on your car loan, and current market rates have dropped, you may want to consider refinancing. Interest rates are at near-historic lows right now, and you may qualify for a better rate.
Borrowers whose credit has improved significantly since they first took out the loan may also be eligible for a better rate. For example, if you had a bankruptcy or default fall off your credit report, your credit score may be much higher now.
If you can refinance with a co-signer or co-borrower, then you may receive better rates if you were the only borrower on the original loan.
Recommended Reading: Does Fha Loan Require Down Payment
Should I Refinance My Car Loan 4 Questions To Ask Yourself
Do you have a car loan with a higher interest rate than what youre seeing advertised as available right now? And are you looking for a way to alleviate that strain on your monthly budget?
Refinancing your auto loan is actually a fairly simple process that can help you save some serious money. Many car loans can be refinanced without loan origination fees or prepayment penalties, which means you should see the benefits of a lower interest rate immediately.
But before you start shopping for a new loan, there are some questions you need to answer to determine whether it makes sense for you to refinance.
Team Clark has sought the advice of money expert Clark Howard on the topic, and weve trimmed things down to four questions you should ask yourself before moving forward with refinancing your car loan.
Mistakes To Avoid When You Refinance Your Auto Loan
When you take out a loan to finance the purchase of a new or used car, you dont have to be stuck with that loan until the end. If you refinance your original loan with a new lender, you could end up saving money by getting a lower interest rate and monthly payment. But as with any financial decision, its best to take time to consider whether or not refinancing makes sense for your individual circumstances. If it seems right for you, make sure you avoid these common mistakes when it comes to refinancing so you can maximize your savings.
Read Also: When To Apply For Ppp Loan Forgiveness
Qualifying To Refinance A Car Loan
In order to qualify for refinancing, you generally must have had your auto loan for at least one year, and your credit score must have improved over that time. You also have to have equity in the car, which means you owe less on your loan than the vehicle is worth. If you dont meet these requirements, you aren’t going to be able to refinance.
Your car must also fall within the lenders acceptable range for both age and mileage, and they must also agree to refinance the loan balance. Not all lenders have the same qualifications, so not all lenders are right for every refinancing situation.
Lastly, in order to refinance your current vehicle, you have to be current on your loan. So, if you have already missed a payment due to issues caused by the COVID-19 pandemic, refinancing isn’t for you. However, you may not need to refinance to get the help you need in these trying times.
If I Refinance My Car Loan Will I Lose My Warranty
Refinancing your current auto loan can impact your extra coverages.
When car owners consider getting new auto loans, they have a lot of questions:
Finding the lowest interest rate is important. So is knowing how to navigate the auto refinance process when you have bad credit.;But theres one question many dont think to ask:
If I refinance my car will I lose my warranty, vehicle service contract, or gap coverage?
If you took the safe route and purchased extras like the ones above, you should know what happens to them before you refinance your auto loan. So, weve compiled a quick reference guide to help you determine what extras carry over and what youll need to renew.
First, lets start by overviewing the various types of extras.
2021 Auto Refinance Rates
Also Check: Which Bank Gives Loan For Land Purchase
Cash Out Auto Refinancing Process
The process is pretty simple. You can speak with your credit union lending expert or fill out an application. However, there are a couple things you may want to consider.
- You want to know the value of your car or truck – Do some research. Look at the NADA website at;;to get an understanding of your vehicle’s value.
- Consider your credit score – As with all kinds of lending, your credit matters in determining whether you can get the financing you want as well as what;interest rate;you qualify for.
With any financial decision, you’ll want to examine why you want to refinance. You should think about what benefits you will reap from the refinancing, how it serves your financial interests, and how it fits into your personal financial picture.
Why Refinance Your Car Loan
Most borrowers choose to refinance their car loan in order to pay less interest on a monthly basis. When you refinance an auto loan to a lower interest rate, you can save hundreds or even thousands in total interest over the life of the loan.
You may end up with a lower monthly payment, which will free up money you can use to pay off other loans. A lower payment will also reduce your debt-to-income ratio, which reflects your monthly debt payments divided by your monthly gross income. If youre planning to apply for a mortgage at some point, a low DTI could also help you qualify for a better interest rate.
Conversely, some borrowers choose to refinance their car loan to a shorter term so they can repay the loan faster. You can also refinance a car loan to a longer term, which can provide some wiggle room in your budget. Another reason to refinance could be if you first got the car loan with a co-signer and want to remove them from the loan.
You May Like: How To Eliminate Student Loan Debt
Pros & Cons Of Refinancing Your Auto Loan
When buying a car, many buyers accept the loan package they are offered at the dealership. Though convenient at the time, you may later come to regret the conditions of your auto loan once youve started making payments. Refinancing your auto loan is one way to get better terms and potentially reduce your interest rate and monthly payments, helping you save more money. An auto loan refinance involves taking out a new loan to pay off the balance of your existing loan, and transferring the title to the new lender. While refinancing your auto loan can improve your overall finances, it may not always be the right choice for you. There are a few things to consider before applying for an auto loan refinance.
Mistakes To Avoid When Refinancing Your Auto Loan
Refinancing your car loan doesnt always make financial sense. The main mistake you can make when it comes to refinancing is timing. If any of the following scenarios apply to you, it may be worth it to stick with your current loan.
- Youre far along in your original loans repayment: Through the amortization process, your interest charges gradually decrease over the life of the loan. As a result, a refinance has more potential to save money when youre in the earlier stages of repaying the original loan.
- Your odometer is hitting big numbers: If youre driving an older car with high mileage, you may be out of luck. Most auto lenders have minimum loan amounts and wont find it worthwhile to issue a loan on a car that has significantly depreciated in value.
- Youre upside-down on the original loan: Lenders typically avoid refinancing if the borrower owes more than the cars value .
- Your current loan has a prepayment penalty: Some lenders charge a penalty for paying off your car loan early. Before you refinance your loan, investigate the terms of your existing loan to make sure that there are no prepayment penalties.
You May Like: Are There Student Loan Forgiveness Programs
Home Appraisal Vs Vehicle Bookout
Both types of refinancing involve an appraisal which will determine the current market value of the property.
The appraised value of your home or car is important because its used in calculating your loan-to-value ratio, or LTV. Its a percentage calculated comparing your loan balance to the propertys value.
To lenders, a lower loan-to-value ratio poses less risk to them. Because you owe less on your loan than the car or home is worth, that positive equity makes it easier to recoup any potential losses .
How much is your current car loan balance?
What’s your car’s current value?
A loan-to-value ratio over 100% means you owe more on your loan than your vehicle is worth. An LTV over 125% can make it harder, but not impossible, to qualify for a refinance loan.If your LTV is less than 100%, your car’s value is higher than what you owe on your loan. The lower your LTV, the better.
How To Refinance A Car
For the most part, refinancing a car loan is similar to getting a car loan for a new purchase. Start by doing your research on various lenders to get an idea of what terms are available and which offers you might qualify for.
With some lenders, you may be able to submit an application to get pre-qualified. This process typically doesn’t affect your credit but can be valuable in helping you see what you qualify for based on your credit scores.
Once you have enough offers to compare, select the best one for you and submit an official application. The lender may require information on you, the car and your existing car loan. Provide this information as quickly as possible to make the process go smoothly.
If you get approved and you accept the terms the lender offers, finalize the loan by signing the paperwork. The lender will pay off your existing loan directly.
During this process, don’t forget to continue making payments on your current loan until it’s paid in full. The last thing you want is to have your credit dinged because your new lender didn’t pay off the old loan in time.
Also Check: Are Va Loan Interest Rates Lower
When To Refinance A Car
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Figuring out if and when you should refinance a car can be tricky, but if you approach it the right way , youll be able to make the right choice. You should refinance a car when it could help you save money, get you a lower payment or both. You should probably skip refinancing if youre underwater on your current loan, youve bought the car recently or your current loan has prepayment penalties.
Heres more on when to refinance a car and when to wait.
Consider Selling Your Car
If you do not feel that you can afford to keep the car, it is better to sell it than to let it get repossessed. Selling a car is fairly straightforward if you can get at least enough for it to pay off your loan. However, it is not uncommon for people to be upside down owe more on the loan than what they can sell the car for. What do you do in this situation?
- One option would be to ask the lender to forgive the difference between the amount that is left on the loan and what you sell the car for.
- Another option would be to set up a repayment plan for the balance remaining on the loan. Since, in most cases, you can sell the car for more than the lender can, you probably would not have to pay back as much as if you let the car get repossessed.
If you are planning to get another car, you may be able to roll over the remaining balance into the new car loan. However, this option will only save you money if you purchase a new car that is much cheaper than the one you have now.
If you cannot sell the car at all, you can see if the lender would be willing to accept the car back. This is called a voluntary repossession. Most lenders report voluntary repossessions on credit reports , so you may only want to consider it if other options have not worked out or if the lender is willing to give you something in exchange for turning in the car, such as a reduction in the amount you need to repay.
Also Check: How To Apply Loan In Sss
What You Need To Know After Closing The Auto Loan
Upon closing the refinance auto loan, you will be required to ensure you are listed as the registered title owner and PNC Bank as lienholder.;
If you are currently listed on the title, PNC Bank will need the original title and state required form signed/dated. Everyone’s situation may be different, so if there are additional steps needed to be taken to secure the title, a representative from PNC Bank will be in contact with the you to further instruct.
Is The Time Right To Refinance Your Car Loan
Interest rates are still hovering near historic lows for mortgages, but did you know that those same super low rates also may make it wise to refinance your car loan?
You may have heard of refinancing a mortgage but did you know you can also refinance a car loan?; If you decide to refinance, you may save money in a number of ways.;
- Your current interest rate is high. When you first bought your car, you may not have qualified for the best rate. Or, since you originally took the loan, your credit score may have improved, entitling you to a better, lower rate. In some cases, rates in general may be lower and can be applied to your balance.
- You want to lower your monthly payments. A lower interest rate can reduce your monthly payments without increasing the term of the loan.
- You want to pay your loan off sooner. If you qualify for a lower interest rate, you can continue to make the same monthly payments and pay off the loan faster than you originally planned because more of the monthly payment will be applied to principal.
Sounds great, right? For some people, it’s a beneficial financial choice. One way to decide is to use a;calculator;tool to estimate your potential savings.
You May Like: Is It Too Late To Apply For Ppp Loan
