Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering interactive financial calculators and tools that provide objective and unique content. We also allow you to conduct your own research and evaluate information for no cost to help you make financial decisions with confidence. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The products that appear on this website are provided by companies that compensate us. This compensation can affect the way and when products are featured on this site, including, for example, the sequence in which they be listed within the categories of listing, except where prohibited by law. This applies to our loan products, such as mortgages and home equity, or other home loan products. This compensation, however, does affect the information we provide, or the reviews appear on this website. We do not contain the entire universe of businesses or financial deals that might be open to you. Tom Werner/Getty Images
3 minutes read. Published February 24, 2023
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ways and pitfalls of borrowing money to purchase an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to manage their finances with precise, well-researched, and well-written information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate promise
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If you have questions about money. Bankrate has the answers. Our experts have been helping you manage your money for over four decades. We are constantly striving to give our customers the right guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our content is truthful and accurate. Our award-winning editors and journalists provide honest and trustworthy content to help you make the right financial choices. Our content produced by our editorial team is objective, factual and uninfluenced through our sponsors. We're honest regarding how we're capable of bringing high-quality information, competitive rates and helpful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods and, services, or through you clicking specific links on our website. So, this compensation can affect the way, location and in what order items appear within listing categories and categories, unless it is prohibited by law. This is the case for our mortgage or home equity products, as well as other products for home loans. Other elements, such as our own rules for our website and whether or not a product is available within the area you reside in or is within your self-selected credit score range can also impact the way and place products are listed on this website. Although we try to offer the most diverse selection of products, Bankrate does not include details about every financial or credit item or product. If you're having difficulty making your current loan payment, replacing your auto loan by a fresh one -- can be an excellent way to save money and continue to drive your vehicle. However, there are a few common mistakes to avoid so that you don't find yourself in yet another financial crisis. The top seven mistakes in refinancing your car Avoid these common pitfalls when refinancing your vehicle loan. 1. Not checking refinancing requirements Lenders have specific requirements in refinancing. Be on the lookout for the criteria pertaining to your vehicle's age, miles and even the amount left to repay the loan. For instance, lenders typically require a minimum of six months' worth of payments for the loan and a remaining balance between $3,000 to $5,000 to refinance. Tips from Bankrate
There are specific refinancing requirements from lenders' websites or Bankrate's .
2. Do not contact your current lender initially. Although your current lender might not offer the lowest rates, it is still the most effective place to begin. Before looking into refinancing alternatives outside the current lender it is advisable to contact them and tell them about your situation to see if they can help. Some lenders offer , which changes the conditions, the payment due date or interest rate , to help borrowers get financial relief. Bankrate tip
Even if you don't follow through with refinancing your loan It is possible that they can offer you a better deal than an existing lender could.
3. The extension of the loan term too much The purpose of refinancing is to cut costs, but should you extend your loan excessively and you are spending more over the loan's life. While a will mean lower monthly payments but you'll also be paying more interest. Tip from Bankrate
Before adjusting your term make use of auto refinances to ensure you save money.
4. Do not take your credit into consideration In most cases of financing, your credit score serves as the main determinant for approval. So, work to improve and before you refinance your loan. You're more likely to be eligible for the loan and leave with more money in the end. loan overall. A credit score of 670 or greater typically qualifies borrowers for the best interest rates. Tip from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Just shopping with one lender Just as you would when you are shopping for your first auto loan, we recommend comparing at least three different lenders. Therefore, even though signing on the first loan offer might sound appealing, not all loans are made equal. Ultimately, the lower the interest rate, the less you'll pay for your car payment. You need to ensure that you're getting the best deal available. Tip for banks
Compare current rates that are offered by a variety of lenders. Pay close attention to the eligibility requirements, repayment options, and how they compare to what you currently have on your loan.
6. Being upside down on your loan Prior to refinancing, you should determine what equity in your vehicle lies with the help of . Equity is the amount at which the value of the car is higher than the amount you have to pay on the auto loan. If you are owed more than what your car is worth or have negative equity refinancing your loan is probably not a good idea. The bankrate advice
Don't refinance a vehicle you're not able to pay for. Check where your may be in excess and calculate the expected expenses prior to signing a new loan.
7. Don't give up after the first rejection Auto loan refinancing requirements differ between lender to lender, so even if you've been denied by one lender doesn't mean that you'll be rejected by all. If you're wondering, "Why can't I refinance my car?" you have the right to inquire with for the lender to explain the reasons under the (ECOA). They must explain to you the reason your application was denied. Bankrate tip
Understanding why you were denied will improve your chances of being approved later on. For instance, if the credit rating of yours is low You can work towards improving it prior to applying again.
The bottom line is that refinancing your vehicle loan could be risky It is an excellent method to cut down on your monthly cost and continue paying for your car. Make sure to keep these mistakes in mind and be up to date on current to ensure you walk away with the best loan for your requirements.
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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ins and outs of securely taking out loans to purchase a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to control their finances with precise, well-researched and well-informed information that breaks down otherwise complicated topics into digestible pieces.
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