Auto refinancing is a mysterious thing. Many people don’t even realize you can refinance an auto loan. Others believe it’s a trap or a path to bad credit (hint: it’s not). There are tons of refinancing myths associated with refinancing your auto loan, and separating myth from fact is an important part of lowering your monthly payments and even improving your credit score. Here are the top five myths about this process and the truths behind them.
1. It’s a Bad Time to Refinance.
This is the most common refinancing myth that always seems to crop up. The truth is, the only time that is a bad time to refinance is one where the current prime interest rate is higher than the rate you’re currently paying. There is no way that a 5 percent interest rate is a bad time when you’re paying 11 percent on your existing loan.
2. I Have Bad Credit.
Another refinancing myth is that if you have bad credit, you can’t refinance your car and will get automatically declined. The truth is, there are few instances where a decline is automatic. Most lenders will be willing to at least investigate your credit, and even if you have poor credit you may still be able to refinance. If you have made good faith payments on your existing loan, on time without missing payments, this can sometimes trump an overall poor credit history.
3. My Loan is Underwater.
Your car value depreciates severely the moment it goes off the lot. That means a lot of car buyers are underwater for at least part of their loan. Many lenders will refinance used vehicles that are underwater so long as their owner has been making good faith payments. Indeed, a refinance may be in the lender’s best interest as it ensures you’ll have an even easier time paying it down!
4. There’s No Money in It.
This is untrue as well. Even if you save only twenty bucks a month, this is still a significant savings over the course of your loan. What happens if you put that twenty bucks into a savings account every month for the life of your loan? Over the course of a six year loan, by the time you’re paid out, you’ve saved $1,440. That’s nearly enough for a short vacation!
5. It’s a Huge Hassle.
This is entirely untrue. Anyone who tells you that your car refinance is going to require tons of paperwork, extra appraisals, justifications of wear and tear or other issues is just wrong. There are no appraisals on an auto loan and the only justification you may have to make is if you disagree with the condition of your vehicle on the Kelley Blue Book value.
The truth is, a refinance loan is one of the easier types of credit for which to apply.
There are many auto refinancing myths, and most of them make it look much harder or more tedious than it really is. If you would like to explore this option for your vehicle, take a look at ourauto refinancing resources, and give us a call to get started today!