Thinking about refinancing your car loan? Whether you’re cruising through Crescent City, running errands in Eureka, or winding around Weaverville, you may wonder if it’s time for a better deal. Maybe you need to lower your monthly payments or you want a better interest rate. Perhaps you’d like to pay off your loan faster.
Good news! Refinancing a car loan is easier than you think. Here are 5 simple tips to help you navigate the process:
Tip 1. Review your current loan.
Take a close look at your existing loan terms.
- How much time is left on the loan? If you are close to paying it off, refinancing is probably not a good option for saving money.
- Is there a significant early repayment penalty?
- What is your remaining balance—both the principal and interest?
- Do you want to change your current lender or interest rate?
Tip 2. Assess your current financial situation and your car’s value.
Refinancing makes sense only if market conditions or your financial position have improved.
- Have interest rates dropped since you took out the loan?
- Has your credit score improved?
- Have your financial circumstances changed? If you’re earning more, you may want to pay off your loan sooner. If you’re not making as much as before, you may want to reduce your monthly payment.
- Do you have positive equity in your car? Check to see your car’s current value on Kelley Blue Book (KBB). If you have negative equity, you may still be able to refinance the car, depending on the lender.
- What is the car’s age and mileage? Lenders may adjust rates and terms based on the model year and/or mileage.
Tip 3. Gather the necessary information and paperwork.
Most lenders require the following:
- Personal information: your driver’s license, Social Security number, address, and phone number
- Vehicle information: your car’s make, model, year, mileage, and VIN (Vehicle Identification Number)
- Proof of insurance: a copy of your insurance card or a recent statement
- Proof of income: your pay stubs, W-2s, or tax returns
- Proof of residence: your utility bill, mortgage statement, or lease agreement
- Vehicle registration: your registration card or online proof
- Current loan information: details about your lender, your account number, and remaining loan balance
Tip 4. Get prequalified by multiple lenders.
Do some comparison shopping.
- Explore options. You’re not obligated to stay with your current lender. However, ask if they’ll offer you better terms to keep your business.
- Get prequalified. Apply to a number of lenders who offer pre-qualification with a soft credit check, which won’t impact your credit score. Prequalification provides estimated rates and terms for comparison, but it isn’t a final approval.
- Consider joining a credit union. As financial cooperatives, credit unions tend to offer lower rates, smaller loan amounts, and more personalized service than banks. Plus, they may have simpler application processes and be more flexible with approvals.
Tip 5. Choose the best lender for you.
After gathering offers, evaluate which one works best.
- Compare loan offers with a car loan calculator—such as Coast Central Credit Union’s Compare Two Vehicle Loans calculator—to evaluate loan terms, interest rates, and monthly payments.
- Pay attention to fees. You may need to pay a title transfer fee, but avoid unnecessary processing or documentation fees.
- Know the total cost of the loan. A lower monthly payment may sound appealing but could result in higher overall costs if it extends your loan term.
- Read your terms carefully. Ensure the interest rate, term, and payment schedule match what you were promised.
When you refinance, your new lender will pay off the loan directly or send you a check to forward to your previous lender. Many lenders will transfer the title automatically. Be sure to confirm with your previous lender that the loan has been paid in full, the title has been properly transferred, and your account is closed.
Can I Refinance My Car Loan?
Now that you’ve read the tips for how to refinance a car loan, are you ready to start the process? Coast Central Credit Union offers competitive auto loan rates, flexible terms, and friendly personalized service. Not yet a member of Coast Central? Find out more and apply today: coastccu.org/personal/auto-loans.
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