How refinancing your car loan could put some quick cash in your pocket
2020 has been an interesting year for finances, to say the least. Many families have been hit with unexpected expenses, while others have found surprising windfalls amidst all the uncertainty.
If your household would find extra cash helpful right now, consider refinancing your auto loan before you cash out your hard-earned stash of points. That's right: Just like its better-known cousin, the residential mortgage refinance, an auto refinance can put extra money back in your pocket. If approved, you could save thousands of dollars over the lifetime of your loan, either through a lower monthly payment or from savings on interest — or both.
Here's everything you'll want to know about refinancing your auto loan, as well as how the application and approval process works.
Why go through the hassle of refinancing?
Yes, you'll have to go through another round of paperwork in order to refinance your loan. But in most cases, it's worth it: Many car owners can get approved for better loan terms than when they first purchased the vehicle. Refinancing also gives you the opportunity to adjust the term of your loan.
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On average, car owners who refinance their car loans through TPG partner MotoRefi save $100 a month on each monthly auto payment. Even better, MotoRefi handles all of the tedious work of transferring the car title and paying out the old lender, saving you the trouble of multiple trips to the DMV.
What factors make me a good candidate for refinancing my auto loan?
Every loan and refinance application is different. But as a general rule, successful applicants typically average a household income of $50,000 to $100,000 per year, with a credit score of 650 or higher. (If your excellent credit score qualifies you for a premium credit card, you'll likely be a good candidate for an auto loan refinance.)
A few factors will ensure you reap maximum benefit from your refinance. Do any of these apply to you?
- Your credit score has increased since you purchased your car
- You purchased your car when loan rates were much higher than they are now
- You would benefit from shorter terms on your loan repayment
Related: How does applying for a credit card affect my credit score?
What happens when I apply for refinancing, and does the application trigger a credit pull?
There are two main steps to the process: You can check your potential refinance rate through MotoRefi, just to get an idea of what you would qualify for. The process takes less than 90 seconds to complete online, and you'll be paired up within seconds with lenders who are interested in working with you.
When completing this online form, you'll submit some data about your vehicle such as your VIN or license plate number, as well as some personal information regarding your finances and income, not unlike a credit card application, all of which is used to determine the value of your vehicle and find the best loan options available to you.
The second step happens after you select one of the loan options and move forward with the refinance. At this point, MotoRefi will perform a hard credit inquiry, which will be recorded by credit bureaus, so keep this in mind if you're also planning to open a new credit card or purchase a house.
What type of vehicle can I refinance through MotoRefi?
You can refinance any type of passenger vehicles including cars, trucks and SUVs. Unfortunately, you cannot refinance a motorcycle or a commercial vehicle, or buy out an auto lease through MotoRefi at this time.
Can I add a co-borrower during my refinancing process?
Yes, MotoRefi allows you to add a co-borrower to your new loan as long as your state of residency permits the addition.
Will the refinance cost me anything?
As with a home mortgage, there are some fees associated with the work of processing the application documents, retitling the vehicle. To cover these costs, MotoRefi charges $399 for the entire process, which is included in your refinanced loan total.
Bottom line
A refinance isn't for everyone, especially if your credit score has recently gone down or if your employment history has been negatively impacted since you purchased your vehicle. But if you'd like to utilize your responsible credit management to put some extra money in your pocket, an auto loan refinance may be just the ticket —and MotoRefi offers an easy way to get your refinance offers up front.
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