Are you still paying off your auto loan and are also experiencing financial hardship? Perhaps your finances are fine but your auto loan rate is higher than you prefer. Lower auto refinance rates are available for you to explore today. What is an auto refinance loan and how do I get one?
Auto refinance works the same as it does for home refinance loans, albeit with different collateral and terms. What are the most important things to consider when you refinance car loan rates in 2021? What are the most popular ways to get an excellent refinance auto loan in today’s market? Read ahead for information about why a refinance auto loan could benefit you now.
Before applying for a new loan to get the lowest auto refinance rates available it is important to understand how an auto refinance loan works. Several important steps are involved for both you (the borrower) and your lender.
Most car loan refinance products are like initial car loan products albeit with hopefully lower annual percentage rates (APRs). APRs are offered based on your credit (FICO) score, your income and other factors. When refinancing a loan your lenders also look at your car loan payment history. If your auto loan payments were all made on time your lender might be willing to give you an even lower APR because of your documented and verifiable creditworthiness.
An auto refinance loan is a secured loan similar to how a home mortgage is a secured loan. A secured loan is backed by collateral. Collateral is an item used to secure a loan in the event you default on payments.
If you default on your auto loan your lender has the right to repossess your vehicle. This is the same for normal auto loans, so what is the difference between a refinance car loan and your original vehicle purchase loan?
The primary purpose of obtaining auto loan refinance rates is to lower your monthly payments via reduced APR finance charges.
Car refinance rates are still subject to variable lending market fluctuations, and the lowest auto refinance rates available might not be less than the finance charges you are already paying for your original purchase loan. That being said, it is much more likely for you to be offered a lower APR on an auto refinance based purely on good credit and payment history than it is on a mortgage refinance. This is because the housing market is subject to more government-imposed regulations. Mortgages are also much larger loans than are car loans (in the majority of cases) and therefore harder to refinance.
Auto refinance lenders underwrite your refinance auto loan to assess for risks and potentials for losses. The underwriting department essentially determines the car refinance rates they are willing to offer you. The lender’s refinance-based underwriting department also decides the possible lengths of the new loan term for which you qualify. Once your refinance car loan is approved, it is funded and your new payments at a lower APR begin.
