How to Refinance a Car Loan

 

If you'd like to lower your monthly car payments and pay less in interest, you should know how to refinance a car loan! Although applying for a better loan package can be a nerve wracking experience, the stress is far from inevitable. Learn more about the best way to refinance an auto loan in Elgin with Napleton's Elgin Kia!

Kia Finance Apply for Financing


How Do You Refinance a Car Loan?

How do you refinance a car loan? If you've never gone through the steps before, we understand if you're not at all sure about where to start. 

Since the goal of refinancing is to reduce your interest rate, you should have a good idea of what you are already paying month-to-month. Review your documents or give your lender a call; they'll tell you exactly what you need to know before applying to lenders in St. Charles and Streamwood.

Once you have a clear idea of how interest is impacting your month-to-month costs, take the following steps to refinance a car loan:

  1. Check Your Credit Score. 
    • Credit is partially determined by the number of on-time payments that you make each year! So, if you've been staying on track, there's a good chance that your score has improved since you first purchased the vehicle. 
    • If your credit score has improved, you're in a good position to refinance today.
  2. Make Your Applications.
    • You can apply with your bank, a credit union, or any automotive refinance company, and really, you should shop around to ensure that you're getting the best rate.
    • Since making many applications at separate times can have a negative impact on your credit score, you'll want to make all loan applications within a 14-day period.
  3. Evaluate Your Offers.
    • Once you receive responses to your applications, figure out how each new interest rate would affect your monthly payments!
    • Although it's possible to calculate interest by hand, you can save time and energy with our easy-to-use monthly payment calculator.
  4. Consider Your Loan Term.
    • Remember, your interest rate isn't the only thing you should consider when you're determining the best way to refinance an auto loan. 
    • Choosing a shorter term will increase your monthly payments, but you'll pay less in interest over time. With a longer term, you can make a more significant impact on your monthly payments, but you may end up paying more over the years.

You've seen how to refinance a car loan, but there are still a number of pitfalls and caveats that any driver should be aware of!

What to Know When Refinancing Your Car

Refinancing isn't necessarily the right move for your budget. Here's what to know when refinancing your car:

  • Does Your Current Plan Have Associated Fees?
    • In some loan packages, there are significant fees associated with refinancing, or with paying your loan off early. If these fees are present, it may be better to keep plugging away at your existing loan.
  • Are You Underwater On Your Car Loan?
    • If your vehicle is worth less than the current balance of your loan, getting approved for refinancing can be more difficult. 
    • If you can make extra payments and get above water before you apply, it's smart to do so.
  • How Old is Your Vehicle?
    • For many refinancing lenders, a very old vehicle isn't worth investing in. That means it will be more difficult to secure refinancing if your vehicle has already lost a significant amount of its value through depreciation.

Still have questions about what you should know before you refinance a car? Talk to an expert on our financing team! We can provide advice tailored specifically to your unique situation, or help you compare lease vs. buying options.

Learn More About Your Options with Napleton's Elgin Kia!

You now know how to refinance a car loan, and we hope that you're eager to get started! Come in and visit us today, or take advantage of our easy-to-use online credit application.