Interested in an auto refinance? Obtaining an auto refinance can be a great way to lower your monthly payment.
Qualifying for the lowest auto refinance rate is key to getting the best loan terms. If your credit score has improved since you got your original loan, you are in the best position to refinance. However, there are still a few other ways to get a great rate. We’ll cover how to get the lowest auto refinance rate below.
What is an Auto Refinance?
The process of getting an auto refinance entails taking out a new loan (with more beneficial terms) to pay off the balance of the existing one.
Refinancing your auto loan can improve your financial situation by resulting in a lower monthly payment and reducing the interest rate you pay on your balance over time. You must apply for refinancing just as you applied for your initial auto loan. The lender will evaluate your application based on your overall creditworthiness, including your credit score.
If your credit has improved, now could be the right time to take the next step!
How to Get the Lowest Auto Refinance Rate?
If you aren’t happy with your current auto loan payment, there are a few ways to make sure that your next one has the best possible terms. Here are a few ways to ensure you get the lowest auto refinance rate:
Know your credit score
All three of the major credit bureaus offer a free annual credit report to consumers. It is always suggested to check your credit score and complete credit information at least once a year to review for any negative marks or inaccuracies. When you check your credit report, it should not count as an inquiry against your credit score.
Knowing your credit score is the first step to improving your overall creditworthiness. If your rate is lower than you’d like, you may want to take some time to improve it before applying for a new auto loan.
Improve your financial health
If your credit score is lacking, taking some simple steps to bring it up can make a significant difference in the rate that you qualify for.
Some ways you can improve your credit score include:
- Paying down your highest balances
- Ensuring you make all your payments on time
- Diversifying your credit portfolio
- Requesting increases on your credit limits
To have the best possible credit score, you want to aim for 30% credit utilization or less. If you consistently carry high balances on your credit cards, this will bring your score down — even if you make all your payments on time.
If you want the lowest auto refinance rate, try taking some of these smart financial steps before applying.
Shop around for the best rates
Keep in mind that you need to consider the overall loan product when making your refinancing comparison.
In addition to the interest rate, look at the loan terms and any associated fees to select the best possible financial product for you. Typically, credit unions will have the most flexible loan terms and most competitive interest rates — along with lower fees — to serve you.
Even if your credit score has not improved since your initial loan, you may still be able to find a refinancing product that works for you. Since every lender has different requirements, shopping around and checking with multiple lenders can still result in obtaining a lower interest rate and better loan terms.
Time it right
Interest rates are also affected by current economic conditions. Watch the market and pay attention to federal interest rates, which influences the Prime rate most lenders use to set the rates for their best customers.
Just like waiting for the right time to obtain a mortgage when rates are low, timing your auto refinance perfectly can make a difference in the amount you pay over the life of the loan. As of 2021, the financial situation is very favorable for consumers with low interest rates and competitive loan products from lenders hoping to take advantage of a rebounding economy. Now is a great time to apply for a new auto loan!
Ready to Start Your Auto Refinance?
At ALEC, we are dedicated to making the process of obtaining a new car loan as easy as possible. If you’re currently paying a higher rate at another financial institution, refinance with us and save money today!
Click below to get started and see just how much you could save.