Whether you pulled your vehicle out of the dealership lot a year or a few weeks ago, you may still love it – but not the loan you applied for to take it home. If you can relate, know there are other financing options available to you. Below are a few common questions about refinancing a car so you can determine if it’s the best path for you.
FAQs About Refinancing an Auto Loan
Why Should I Refinance?
There are a few different reasons to refinance a car. The first is if your financial situation changed. Maybe, you improved your credit score and want to cash in on the benefits by securing a loan with a better rate. Or, when you got the auto loan initially, you could afford a shorter loan term and a higher monthly payment but can no longer do so. On the flip side, you may want a longer term that comes with a reduced rate. For example, if you take out an 84-month loan and have two years to pay on it, you can refinance to a 60-month loan (with the same time remaining) and score a rate 1 - 2% lower. Whatever the circumstances, refinancing gives you access to something more in line with your needs today.
Another possibility is you simply didn’t choose the most competitive offer. Sitting at the dealership looking over your options can be confusing, and you may have made a hasty decision. Refinancing will put a better rate in arms reach. This is beneficial because it’ll allow you to pay less in interest over the life of the loan.
Are There Costs Associated with Refinancing?
While refinancing can make sense financially in some circumstances, it’s important to factor in the associated costs before deciding. First, verify if your current loan has a prepayment penalty. This penalty is a fee for paying off a loan early and is based on a percentage of the outstanding balance.
How Do I Refinance?
First, collect the necessary documents you’ll need to apply for a new loan. This includes your driver’s license, pay stubs, social security number, and vehicle identification number. You are free to apply for loan prequalification at multiple financial institutions to compare options. At General Electric Credit Union (GECU), you’ll see the benefit of our local focus in more personable service than you’d encounter at big banks. Plus, we won’t penalize you for paying off a loan early!
Tip: Apply to become a member of Cincinnati’s best credit union, today! You’re eligible for membership if you live, work, or worship in select counties in Ohio, Indiana, and Kentucky.
Once you select a top contender, complete the application. Your new lender will pay off your old auto loan once everything is finalized.
How Soon After a Purchase Can I Refinance?
While there is no hard and fast rule on this, you’ll need your title in hand first, as this is among the required documentation. This can take up to 90 days after purchase. Another thing to consider is your credit. When you apply for a loan, the lender will do what’s called a hard inquiry on your credit. This will negatively, but temporarily, impact your credit score, so it may be beneficial to wait a few months prior to applying for a replacement loan.
Refinancing a car opens the door to savings. Let GECU guide you through the process so you can secure a more favorable loan term and rate. Our robust digital banking tools, features, and applications provide a seamless experience for members. Make payments through Online Banking or our secure mobile app, take advantage of our Money Management tool to strategize payments, and pay off your loan early with no prepayment fee!