If you're looking to save money on your car note, refinancing your auto loan is a good way to go about it. Not only can you score a lower interest rate, but you may be able to reduce your monthly payments by essentially stretching the balance on your account out for another five or so years. However, not every loan will be eligible for refinancing. Here are a couple of things lenders look at when deciding whether to approve an application for vehicle refinancing.
The first thing that will come under scrutiny when you apply to refinance your car loan is the balance on your account. Lenders will consider two issues: how the amount owed compares with the vehicle's value and whether the amount being refinanced meets their minimum requirements.
A bank generally will not refinance an auto loan that is more than the vehicle is worth, because an underwater loan means the company won't be able to recoup as much money if it has to repossess the vehicle for non-payment and resell it. However, you may be able to get around this issue by paying down your loan so that it matches the vehicle's value.
At the same time, though, the bank may require your loan to be a minimum amount to qualify for financing to ensure the company will earn enough money to cover the cost of handling the loan and produce a profit. For instance, a lender may have a $5,000 or $10,000 minimum loan amount. If your car note doesn't meet the balance requirements, you'll need to shop around for a lender that doesn't have one.
Another thing that will affect your eligibility for auto loan refinancing is your vehicle's age. Older vehicles often become extra challenging to sell, because they tend to have higher mileages and more wear and tear. Additionally, older vehicles are less valuable. Since banks want to minimize their expenses and risk of losses as much as possible, they generally prefer to work with newer vehicles that may not take as much effort to unload after they've been repossessed.
Therefore, your application for refinancing may not be approved if your vehicle is too old. The time limit will vary from bank to bank, but generally lenders will not finance vehicles that are over ten years old. You may get lucky with smaller or non-traditional lenders, however, so it' may be worth checking with alternative sources if you really need to refinance your auto loan.
To refinance your loan or assistance with other loan issues, contact a lender you trust.