How to Refinance a Car Loan

Man and Woman Signing papers

If you’re interested in lowering your monthly payments or interest rate near Chicago, we recommend exploring auto loan refinancing. But how do you refinance a car loan and is there a best way to refinance an auto loan? For a thorough breakdown of what you need to know when refinancing your car, read on, and then apply for financing to take the next step with Sunrise Chevrolet in Glendale Heights.

How Do You Refinance a Car Loan?

If you’re wondering how to refinance your car loan around Carol Stream, you’ll first need to understand that the goal of refinancing an auto loan is to have one lender pay off your current loan and counter-offer a new loan with better terms than your original loan. Here are the steps you should take to follow the best way to refinance your auto loan:

  • Check Your Credit Score: If you’ve been keeping up with your bills and your debt-to-income ratio hasn’t increased, there’s a chance that your credit score has improved. If so, you’re a great candidate for refinancing for a better loan! If your score has declined, refinancing may not be worth it. Either way, run a credit check to assess your situation.
  • Start Applying: if your score has improved, you’ll want to apply for financing at several lenders, and then use their different quotes to leverage for the best interest rate. Please note that you should submit all of your applications within a 14-day window. Otherwise, you’ll negatively affect your credit score.
  • Decide Loan Term: Once you’ve decided on the best offer, you’ll need to decide on the length of your loan term. Remember that longer loans feature lower monthly payments with more overall interest, and short loans feature higher monthly payments with less overall interest.

What to Know When Refinancing Your Car

Now that you know what the best way to refinance your auto loan is, it’s time to learn about a few things to keep in mind when refinancing:

  • Fees: There may be fees associated with breaking from your loan contract, in which case, you’ll want to do the math to ensure that refinancing is still cost-effective.
  • Underwater Finances: If you owe more on your auto loan than your vehicle is currently worth, you’ll find it hard to get refinancing approval.
  • Older Vehicles: If your vehicle is old and undergone most of its depreciation, most lenders won’t refinance it.

Have More Questions About How to Refinance a Car Loan?

If you have lingering questions about the best way to refinance an auto loan or what to know when refinancing a car, reach out to our staff by calling (630) 348-8312. The answer to the question, “How do you refinance a car loan?”, can be variable and nuanced depending upon your financial history, but Sunrise Chevrolet is here to help Addison drivers every step of the way. Do you have other questions about auto finance? Be sure to check out our car buying tips for information about how to negotiate for a lower interest rate and more!

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