Shopping around for auto refinance is not complicated when you know the right questions to ask. In some cases, refinancing can save you thousands of dollars over the loan term. Let’s look at the most important questions regarding the selection of auto refinance companies.
Number 1: Who Should I Borrow From?
There are various options of lenders, such as banks, credit unions, and online refinance companies. Each one has different criteria for lending, so it pays to compare. Credit unions, for example, only lend to their members and there are membership fees. However, credit union lending rates are low.
Refinance networks, like CARCHEX, have access to nearly 100 lenders of all types. You enter in your data once, and the network finds the best rate. These services finish in days a process that might take you weeks to complete on your own.
Number 2: What Is The APR?
The annual percentage rate, or APR, is the most important piece of information you will want to know from any potential lender. The rate is based on the US Prime Rate which is the interest large banks charge to their most creditworthy customers. If your credit rating is good, the APR you get should be close to the Prime Rate.
Number 3: Shorter Term Or Lower Monthly Payment?
This is a question you will need to consider. If you decide to pay more each month after refinancing, you can end up paying down the loan and owning your car faster. The other option is to go with lower monthly payments and keep the same loan term. In any case, ask about the payment and term options to find which strategy suits you best.
Number 4: What Are The Fees?
Depending on your original loan contract, you may have to pay an early termination fee. There can also be transaction fees when you switch lenders. Each state also charges a re-registration fee when you refinance. These fees vary on a state-by-state basis.
Even with these fees, refinancing can save you money since a lower interest rate can translate into thousands of dollars of overall savings.
Number 5: Will My Auto Insurance Be Affected By Refinancing?
Insurance is higher for newer cars since they are worth more. Now that you are refinancing, the value of your car can be reevaluated. It might be that you qualify for a lower car insurance rate. Also, some lenders do not require comprehensive auto insurance, so if you drop this coverage your insurance premium will be lower.
GAP coverage covers the difference between what your car is worth and what you owe on your car loan. Some lenders might require you to purchase this type of coverage.
Refinancing a car or truck is not difficult if you know what to ask about. Also, refinance networks, like CARCHEX, do most of the work for you, especially finding the lowest interest rates. Let CARHEX help you find the best refinance deal today.
Published in CARCHEX Auto Finance Resources by CARCHEX on November 12, 2014