According to Lantern by SoFi, “Auto loan refinancing is taking out a new loan to pay off your existing car loan.” Although the process can be easy, many people mistake doing it wrong and regret their decision later. Here are the most common mistakes people make when vehicle refinancing and how to avoid them to make the most of your refinance experience.
Relying on Comparison Sites
If you’re considering refinancing your car through a comparison site, check whether or not they have relationships with any auto finance companies. If they do, there’s a chance that they might receive kickbacks in exchange for steering customers their way—so be sure to vet all options carefully before choosing one.
Not Picking the Right Lender
Picking your lender is crucial to getting a good deal. You can get great rates from lenders who aren’t your bank or credit union, so shop around for refinance lenders and loan comparisons and quotes. Ensure that any lender you go with is part of an established network accredited by the Better Business Bureau (BBB). Robins Federal Credit Union is such a lender, and our experts are happy to answer any questions you have about auto financing in general.
Not Doing Your Research
Before shopping for car loan rates, make sure you’re ready. If you already have a set idea of where you want to shop and how much money you want to spend, fabulous! But if not, don’t rush into it. Set aside time to explore your options and do your research so that when you start looking at loan offers, it will be with fresh eyes.
Thinking Rates Aren’t Important
It would help if you always shopped for auto loan rates because your rate can impact how much you pay in interest. The lower your interest rate, the less you will pay over time.
Failing to Understand Your Credit Score
If your credit score isn’t where you think it should be, there are some simple steps you can take to help improve it
- Pay off any outstanding debts.
- See if you can get a credit card with an introductory 0% APR period.
- Avoid closing unused accounts.
A high credit score helps to ensure that you’ll get approval for your auto loan, so check yours before applying.
Neglecting Down Payment Savings Plans
A down payment is one of three costs that comprise an auto loan—the others being your monthly note and interest. Start now if you don’t have at least 20% saved for a down payment. It’s less painful to save $500 every month than to finance an extra $500 per month over 60 months. Even if you end up financing, aim to pay off your loan as quickly as possible by contributing toward principal each month.
There are many things to consider when refinancing your auto loan. For example, consider these aspects if you want to make sure that your car refinancing experience is as smooth as possible.
