There are so many different myths surrounding auto loans that you will definitely want to make a point of seeing what some of them are. When you take the time to get this information, you will be able to decide for yourself whether or not you want to refinance your auto loan. The fact is that refinancing your auto loan can be a good idea, but it’s not something that everyone should do.
1. You will not be approved if you have a low credit score
One of the most common myths when it comes to refinancing an auto loan is that you won’t be approved if you have a low credit score. Your credit score is definitely an important factor that lenders consider when you submit a refinancing application, but there are others. Just because you have a low credit score just not necessarily mean that you won’t be able to refinance your loan successfully. You should at least fill out an application so you can see if you can do it.
2. A good credit score guarantees approval
A good credit score will certainly help you with refinancing your auto loan, but there is no guarantee that you are going to get approved. There are numerous factors that a lender will take into consideration when you are applying for this sort of loan, so you will need to remember that. Some auto financing companies have other requirements that must be satisfied besides just a good credit score. For example, Capital One won’t refinance a vehicle that is more than seven years old. It is important that you find out what these requirements are before you even apply.
3. Underwater auto loans can never be refinanced
It is a fact that vehicles lose about 10% of their overall value the moment they are driven off the lot, according to Carfax. Accidents as well as high mileage can also significantly lower the value of any vehicle. If the car is worth less than the outstanding loan, the loan is considered underwater or upside down. Experts often say that even if a loan is underwater, refinancing could be possible if you are able to make extra payments and pay down the original loan so that the balance is in line with the vehicle’s current value.
4. Refinancing an auto loan won’t save you much money
A lot of people are under the impression that refinancing an auto loan won’t really help you to save all that much money. The truth is that depending on what your specific situation is like, you could save a lot of money by refinancing. This is not true for everyone, but many people have saved a considerable amount by doing this. You should think about using an auto loan refinancing calculator to compare the changes to your monthly payments as well as overall interest as a result of refinancing. You should be weary of fees that complicate the calculations though. If your original auto loan has a prepayment penalty, you may have to pay part or all of the remaining interest if you pay off the loan early.
5. You don’t need to shop around when refinancing an auto loan
You definitely want to make a point of shopping around when refinancing an auto loan so that you can get the best possible deal. Those who make the mistake of not doing this usually don’t get nearly as good of a deal as they could have. When you are go0ing about comparing auto lenders, you may want to look at the interest rate they offer as well as potential fees and credible reviews. By doing this research you will be able to save yourself from quite a bit of frustration later on.
Refinancing your auto loan can be a great decision, but you will need to do the necessary research first. The more time you spend doing this research, the more likely you will be to get the kind of deal you are searching for. A lot of people have saved quite a bit of money by refinancing their auto loans, and it’s very possible that you can do the same.