For many borrowers, refinancing a mortgage is something they will do some time during the life of the loan. What many people never consider is refinancing an auto loan, even though the car refi application process is much faster and cheaper than the typical home refinance application. In addition, borrowers can save thousands over the life of a refinanced auto loan.
There are three possible ways a consumer might end up with an interest rate higher than what they can negotiate an auto refi for:
1.A new car or truck purchase was financed at the dealership. Dealers typically charge higher interest rates on their auto loans. While reviewing the terms of the auto loan agreement the borrower discovers that his interest rate is 11%, but there are auto rates available for refinanced loans that are as low as 5%. Refinancing at this new rate will save you over $1,000 a year on a $20,000 loan.
2.The borrower was unaware of what was on his credit report and/or what his credit score was when seeking auto financing. Not knowing what the lender knows gives the lender a huge advantage when the terms of the car loan are being arranged. If you know your credit report and credit score before you begin negotiating loan terms you will know what interest rate you deserve. You might even find an error in your credit history that is artificially lowering your credit score. Correcting any errors will help you get a better rate on an auto refi.
3.The financial situation of the borrower has improved. A 2 point improvement in a borrower’s credit score could lead to as much as a 5.5% decrease in the borrower’s interest rate. Of course, a lender will not necessarily inform a borrower he can secure a better rate. Rather, borrowers need to be aware of improvements in their credit scores, and then refinance their loans. Monitoring your credit score can lead to big savings.
The amount of paperwork necessary to complete an auto loan refinance is negligible. You can expect to provide a limited power of attorney; a legal document that allows your new lender to transfer the title of your vehicle from your old lender. You will also need to provide an authorization for payoff; a statement that authorizes the payoff of your current auto loan. It generally lists the current payoff amount and gives your old lender your authorization to forward the title to the new lender upon receiving the payoff. Another requirement is an odometer statement certifying that the odometer reading of your car or truck is correct. One final document that is not mandatory is an authorization to debit account; a form allowing your new lender to debit your bank account for your monthly car payment. Many lenders will offer a discount on the interest rate if you agree to this authorization.
MoneyAisle is revolutionizing the auto loan and auto refinancing industries by having banks and credit unions actively bid against each other in live auctions for each individual consumer request. MoneyAisle creates a safe, transparent auction, providing consumers with free access to great deals in real time. The results are instantaneous; you are offered the best rate available on their platform in just a couple of minutes. MoneyAisle differs from other online auction sites, which are seller-centric, by providing buyer-centric auctions to consumers. Many sellers (banks and credit unions) compete and the buyer ultimately benefits, reversing traditional seller-centric online auction methods, used by sites such as eBay.
Refinancing an auto loan is a great way to save money. The application process is much faster and easier than a typical home loan refinance, closing costs are minimal, and the savings can be huge. By reducing your interest rate by even 1 or 2% you will save yourself thousands of dollars over the life of the loan. That money can then be used to pay down other debt, invest in the future of your children, or help fund your retirement.