Believe it or not, getting an auto loan refinance is becoming standard practice among car buyers. As rates adjust (these days, mostly going lower), it becomes common to shop for new auto loans in the same way that people shop for refinance home loans. After all, if you can save a few thousand dollars by the end of your term, or even a few extra dollars per month, then it makes living on a tight budget a little bit easier to do.
The first thing to look for when shopping for an auto loan refinance is the term. If you only have 3 years left on your current loan, then you’d be foolish to add more time, even if it meant a lower rate or lower monthly payment. On the other hand, if you can get a lower rate for a 36 month loan, then it’s definitely worth taking a second look.
The next thing you want to look for is small things like closing costs and payoff costs. If there is an early payment penalty, then run away. Also, if there are high closing costs, then you should skip the deal as well. The only time a refinance is worthwhile is when the closing costs are zero.
Once you’ve identified the major parts of your auto loan refinance, the rest is pretty easy. Who will take your loan? Will you be able to pay online? Is customer service going to be an issue?
Another important issue with an auto loan refinance is payoff timeline. It’s important to make sure that you keep paying until your new loan goes into effect. If you overpay, then they will adjust your new balance. I’ve seen many problems occur when car owners get an auto loan refinance and assume they can just stop paying on their current loan. If you do this, you will get yourself into trouble, so just keep checking with both companies until the paperwork is straight.
Most people with car loans will get solicitations from refinance companies, but if you haven’t received one and are looking to test the waters, then start with your local bank and credit union, spreading out to other companies you’ve done business with before trying a brand new bank or loan agency. Just a final word of advice – if the deal looks too good to be true, then it probably is. Always read the fine print, and ask questions until you are blue in the face, because once you sign the contract, it’s too late.