The time it takes to refinance a car loan depends on a few factors, including the completeness of your loan application and your lender’s policy. The process can happen quickly, often within a few days of your application. Preparing for refinancing, including checking your credit reports and making sure that you can document the information in your application, can help prevent delays.
Refinancing an Auto Loan
Refinancing an auto loan allows you to secure more favorable terms for your car loan. If you are approved for refinancing, your old loan is rolled into your new, refinanced loan. If you’ve applied for auto loan financing in the past, you’ll find many similarities between the two processes.
Why Refinance?
People refinance their vehicle loans because they want — or need — a change in their current loan agreement. Refinancing allows them to take out a new loan with terms that better meet their needs. Here are some common scenarios:
Interest Rate Change
If interest rates drop during your loan repayment period, you might be able to save some money by refinancing at a lower rate.
Improved Credit
If you financed your original car loan while you had no or damaged credit, check your current credit score. If it has improved since you purchased your car, you may qualify for a lower interest rate if you refinance.
Need to Lower Monthly Payments
Even if you don’t qualify for a lower interest rate, you might be able to reduce monthly payments by refinancing for a longer loan term. You’ll pay more money over time, but the smaller payments each month might be easier on your budget.
Preparing to Refinance
If you are considering a refi on your auto loan, there are several things that you can do before applying that can help ensure a speedy acceptance and, hopefully, approval:
- Use a refinance car loan calculator to see what you can expect to save if you decide to refinance.
- Order your free credit reports from all three major credit bureaus, TransUnion, Experian and Equifax. Check your report for errors and, if you find them, get them corrected before applying to refinance.
- Refrain from applying for new credit, making major purchases or closing credit card accounts. All of these actions can negatively impact your credit score, reducing your chances of approval or getting approved for favorable refinancing terms.
- Gather the documents you may need to apply for your loan. Your lender will tell you what documents you need, but be prepared to provide proof of identity, income and assets. For example, you may need to include pay stubs, W-2s or bank statements with your loan application.
Waiting for a Decision
If your loan application is complete and there aren’t any red flags during the application process, you can expect a decision within a few days. If you are approved for refinancing, the lender may handle paying off your old loan for you, or you may receive the funds yourself so that you can pay off your old balance. Receiving the funds, or the forwarding of the funds, can take a few weeks, so be sure to continue to make payments on your old loan until you can confirm that it has been paid in full.
Once your old loan is paid, you’ll continue to make payments on your new, refinanced contract.
Refinancing can be an effective way to make owning a car more affordable, so it is definitely worth taking the time to research this option with AUTOPAY. Get in touch with us today and one of our knowledgeable team members will answer your questions and help you get the process started.
