Understanding Costs Of Refinancing A Car

Written by Banks Editorial Team
2 min. read
Written by Banks Editorial Team
2 min. read

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Do you want a more affordable monthly payment on your car loan? Or maybe your interest rate was high when you initially got the loan, and you believe there are better options out there? Either way, you can refinance your car loan to lower your payment or get more competitive loan terms. But refinancing comes at a cost, and you should run the numbers to determine if it’s a wise financial decision for you. 

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Is Car Refinancing a Good Option for You?

Refinancing your car loan could be a viable option in these scenarios: 

  • Interest Rates Have Gone Down: If market conditions have changed since you got your current loan, there’s a chance interest rates have gone down. To illustrate, assume you took out a $35,000, 48-month auto loan with a 6 percent interest rate. Your original monthly payment would be $822. Now, suppose you refinance into a new loan with the same repayment period once the balance reaches $27,000 to get a 3 percent interest rate. The monthly payment amount would drop to $619.76, which equates to a cost savings of $202.24 per month. 
  • You’ve Improved Your Credit Score: It’s also possible that your interest rate could be lower if your credit score has improved and you pose less of a risk to lenders. 
  • You Want to Switch Lenders: If your current lender isn’t quite working for you, refinancing is a simple way to take your business elsewhere. 
  • You want to modify who’s on the loan: Some lenders allow you to remove or add a co-borrower to your car loan when you refinance. 
  • You Want to Lower Your Monthly Payments: Your new lender will likely extend your current loan term to lower the monthly payment when you refinance if you want to make more room in your monthly budget. While the new amount could work for your budget, the loan could cost you more in interest over time unless you snag a lower interest rate and go for a shorter term. 

Typical Car Refinancing Costs

Before you apply for auto loan refinancing, there are some costs to consider: 

Early Termination Fee

Some lenders will penalize you for paying off your car loan early, even if it’s through refinancing. 

Transaction Fee

You could incur transaction fees from your old and new lenders when you refinance your auto loan

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Registration Fee

Depending on what state you currently live in, you may have to register your vehicle again when refinancing your ride. 

Title Transfer Fee

You could also be hit with a title transfer fee to give the new lender possession of the title. 

Where Can You Easily Compare Car Refinancing Rates?

If you’re ready to move forward with refinancing your auto loan, start by exploring lenders. You can use an online platform, like Auto Approve, compare refinancing rates and determine if refinancing makes financial sense. 

Here’s how it works: 

  • Step 1: Get a quote without impacting your credit score. Even better, you’re not required to provide your Social Security number.
  • Step 2: Review potential loan offers from banks and credit unions in the Auto Approve network. Rates start at just 2.25 percent, and you can view the actual loan terms you’ll receive if you choose to refinance
  • Step 3: Work with an Auto Approve loan consultant to finalize the application and get the new loan processed and funded. You’ll need to provide a copy of your driver’s license, registration, proof of insurance, proof of income (i.e., pay stubs) and your current loan finance contract if it’s readily available. Auto Approve will then generate your loan and title documents, forward them to you for an electronic signature, and coordinate with the department of motor vehicles in your respective county to handle the title transfer. 

Simple as that, you’ll have between 45 and 90 days until your first payment is due. Plus, you’re not obligated to move forward if the loan offers don’t quite work for you. 

Get your free quote in minutes and compare car refinancing rates today by visiting autoapprove.com.

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