Yong Kim
Have you noticed everything is so expensive nowadays? In the ever-changing landscape of personal finance, rising interest rates can cast a shadow over our budgets, making those monthly car loan payments feel like a looming storm.
But fear not. The good news?
There’s a silver lining in the clouds—car loan refinancing. You can take control of your financial ship by exploring the option of refinancing your car loan. Refinancing is the lifeboat that can help you weather the storm, providing relief in the form of lower interest rates and/or potentially reducing your monthly payments.
In this blog, we’ll walk you through the process of refinancing your car loan, even in the face of climbing interest rates. Let’s dive into the steps you can take to refinance your car loan.
Step 1: Your Credit Score
The first step on your refinancing journey is to check your financial compass—your credit score. It’s crucial to know where you stand. Check your credit score and credit report. A higher credit score often translates to better interest rates. If your credit score has improved since you first got your car loan, you’re in luck. This improvement can be a powerful tool to negotiate a lower interest rate on your refinanced loan.
If your credit score has not improved, we have previously written steps to help you improve your credit score: 10 Creative Life Hacks to Increase Your Credit Score.
Step 2: Shop Around for Lenders
Now that you know where you stand in terms of credit score, it’s time to shop around for refinancing lenders. Cast your net wide and explore different lenders, including banks, credit unions, and online institutions. Each lender offers a unique shore, with varying interest rates and loan terms. The goal is to find the lender with the best terms that will help you stay afloat in these challenging financial waters.
We are not affiliated with any of these lenders, but according to Time Magazine, these are some common lenders for your reference:
| Lender | Loan amount | Term | Min. credit score |
|---|---|---|---|
| RateGenius Auto Loans Refi | $8,000 to no-max | 36 to 72 months | 550 |
| Caribou Auto Loans Refi | Up to $125,000 | 36 to 72 months | 620 |
| Refi Jet Car Refi | Up to $100,000 | 48 to 84 months | 550 |
| LendingClub Car Refi | Up to $55,000 | 36 to 60 months | 600 |
| Upstart Car Refi | Up to $60,000 | 24 to 84 months | 510 |
| Lightstream Car Refi | Up to $100,000 | 24 to 84 months | 670 |
| PenFed Car Refinance | Up to $150,000 | 36 to 84 months | Undisclosed |
| Bank of American Auto Loans | Up to $100,000 | 12 to 75 months | 580 |
| Consumers Credit Union | Up to $150,000 | Up to 96 months | 620 |
| Open Road Auto Loan Refi | Up to $100,000 | 36 to 84 months | 500 |
| myAutoloan | From $5,000 | 24 to 72 months | 600 |
| Auto Approve Car Refinance | Up to $150,000 | 12 to 84 months | 640 |
| Gravity Lending Car Refinance | Undisclosed | 25 to 84 months | Undisclosed |
Step 3: Gather Necessary Documents
Before reaching out to lenders, make sure you have your documents in order. Gather details about your car (year, make, model, and mileage), current loan information, and proof of income. Having these documents at the ready will streamline the application process and help you navigate the refinancing process more smoothly.
Step 4: Apply for Refinancing
With your documents prepared, it’s time to choose a lender that aligns with your financial goals. Don’t hesitate to explore multiple options. Submitting applications to different lenders allows you to compare offers, giving you a better chance of finding the golden opportunity that suits your needs. Remember, the goal is to secure a new loan with a lower interest rate and better terms.
Step 5: Review and Compare Offers
As offers start rolling in, it’s time to navigate through them. Review each offer carefully, considering not only the interest rate but also the loan term, monthly payment, and any associated fees. Comparing offers will help you choose the one that provides the most comprehensive package.
Step 6: Don’t Be Afraid to Haggle
Negotiation is a tool in your financial toolkit. If you receive multiple offers, don’t be afraid to negotiate for a lower interest rate or better terms that align with your financial goals. Some lenders might be willing to adjust the interest rate or other terms to secure your business.
Step 7: Finalize the Refinancing
Once you’ve found the right financial lender, finalize the refinancing process. Complete the necessary paperwork, sign the new loan agreements, and pay any associated fees. This step marks the end of your refinancing journey.
With your new loan in place, continue making payments on your current car loan until the refinancing process is complete. This ensures you stay on course and avoid any financial storms along the way.
In conclusion, refinancing your car loan during a period of rising interest rates is not only possible but can be a savvy financial move. Refinancing your car loan is a powerful tool. By following these steps, you’ll be well on your way to securing a more favorable interest rate and potentially reducing the financial uncertainties that come with your car loan.
This article is not intended to provide you with any financial advice. The above information is provided for general informational purposes only. If you are seeking financial advice, please consult a financial professional.
