Things To Consider When Refinancing A Car

Posted on: 3 March 2016

There may come a time in which you need to refinance an auto loan. You may have agreed to a high-interest rate when you needed to get into a car quickly or your payments may be higher than you can afford today. No matter the reason for the decision to refinance the auto loan, there are four things that your potential lenders will take into consideration as they work to compile an offer for you.

Your Credit History and Rating

This is the first thing that a creditor will check before issuing a loan offer. If you want a better loan offer than the first, your history and rating must be higher than it was when the first loan was taken out.

To find out where your credit stands, order a copy of your credit report from all three of the major credit bureaus. Take the time to examine the reports and report anything that is inaccurate.

Your credit report and history will show how well you manage your monthly expenses. If you make payments after the due date, have too many credit cards or haven't paid down the debt that you owe, your credit rating will have gone down.

Your Monthly Income

How much money you bring in each month will play another determining factor in your loan offers. Prior to submitting a loan application, contact the lender to learn if there is a minimum amount of income that must be made in order to qualify for the loan. Some lenders will require you to make a set amount while others will require you to earn a percentage more than the loan payment. For example, you may need to make 3 times more than the loan payment.

Prepare your income documents ahead of time. Include your last month's pay stubs if you are employed. If you are self-employed, you will likely need any 1099 forms and your last 2 years tax documents.

Choosing a Lender

Before submitting an application with a lender, take the time to research the customer satisfaction over the last few years. The internet will prove to be a valuable tool in determining which lenders use bait and switch tactics when offering loans. An example of bait and switch is when you are initially offered a loan at 4% interest and when the time comes to sign the documents, the interest rate is raised to 12%.

Take your time to find the best lender that offers fair rates. Shopping around may take a little time, but if you are refinancing once, you surely don't want to do it again or you will end up owing more on the car that it is worth due to the interest accumulating. For more information on title loans, talk to a professional like Nekoosa Cash Advance LLC.