Choosing between buying another car or refinancing an existing one can be a daunting decision. Your personal situation and what you need next can influence your choice, so here are some guidelines.
Refinancing or Renewal?
Refinancing works either by extending the term of the loan or by lowering the interest rate (sometimes both). You are replacing an existing loan with another, which gives you the opportunity to change the terms and possibly save money. Your refinancing lender pays off your existing car loan and you start a new one with a new lender.
The biggest question to ask yourself if refinancing makes sense for you this: do you like your current car?
In most cases, borrowers refinancing their car are looking for a lower monthly payment. If you are applying for refinancing, you usually have two options for reducing the payment amount – the right to a lower interest rate or the right to a longer loan term. If you are not eligible for a lower interest rate, your only option to lower your monthly payment is to extend the loan term, which means a longer car payment. Can you imagine keeping it for many more years?
Auto loans are usually in simple interest, which means that your interest is calculated on a daily basis. The longer you have a loan for a car, the more you pay for it. Think about the implications of extending your car loan because it could cost you and possibly pay more than it’s worth for it.
Refinancing and bad credit
Another thing to consider is your credit score. Borrowers with lower credit ratings may find it difficult to obtain a low interest rate.but the good news is that refinancing does not require a flawless credit rating. Refinancing can be done if you have a bad credit history, but there are still conditions that you need to fulfill.
First, most refinancing lenders require your credit rating to be better than it was when you received your original car loan. If you had really bad credit when you got your car loan, but you maintained the loan well and made all payments on time, your credit score may be better.
Another common refinancing requirement is that you don’t miss a single payment on your original loan. Your new lender wants to make sure that refinancing the car will be a good deal for him – they need a guarantee that you can pay off the loan. In addition, lenders do not refinance all cars, they need to know that the car can last for the entire loan term.
Other general refinancing requirements usually include:
- You have been financing a car for at least one year
- The loan amount is neither too small nor too large (varies)
- Your car is less than ten years old or has driven more than 100,000 miles.
- You have equity capital (the cost of the car is more than the loan amount)
Of course, all refinancing lenders are different and they may have more or less requirements.
Evaluate your purchases first
Before you decide to refinance your car or buy another, it is worth taking the time to compare the interest rates offered by local lenders. The higher your credit rating, the better the rates you will be offered.
Every time you apply for financing from a lender who checks your creditworthiness, they make a thorough request (or extract), which slightly lowers your credit rating for up to 12 months. But if you apply to multiple lenders of the same type within two weeks, just one harsh application will hurt your credit rating. They are all listed on your credit reports, but only one has an impact if the assessment is made correctly…
When you have a bad credit history, it is important to consider your credit score and avoid further damage. If your credit rating is too low, you may run into problems eligible for refinancing or another car loan, and applying for a new loan after a few months may simply further reduce your chances of getting a loan.
You can also do the same for another car loan if refinancing is not suitable for your situation.
Financing a car with a bad credit history
If you think refinancing may not work for you or your car, then it might be best to go to finance another vehicle and trade your current one. And if you think your lower credit rating might interfere with another car loan, you have options.
Subprime financing is for borrowers with less than ideal credit. These bad credit car loans are offered in special financial offices… A star credit rating is not required to qualify because they specialize in helping borrowers with questionable credit.
This means proof of income, place of residence and the presence of a down payment. Stability is central to the game: the longer you have worked in the same job and lived in the same area, the better your chances of qualifying. Your income and past work history are also checked.
While sub-prime funding requires an upfront fee (in almost every case), if you have an exchange, it can help meet that requirement. Typically, subprime lenders require at least $ 1,000 or 10% of the vehicle’s sale price in cash and / or exchange capital.
Looking for automatic connections? We got you covered
Whether you are looking for a lender to refinance or a lender who can help with a bad credit history, we have connections for every path.
You can see our resource center for connections and more information on refinancing your current vehicle. Or, if you are in need of another car loan, let us find a dealership for you that has a bad credit history.
IN Car loan ExpressWe have established a nationwide network of dealers that work with subprime lenders. After you complete our car loan application form, we will look for a dealership in your area free of charge and without any obligation. Start your journey to your next car now!