The 4 Step Process for Auto Refinance Loans
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UPDATED: Sep 27, 2012
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Borrowers may wish to refinance their auto loans if they feel they got a sour deal when they first purchased a vehicle. Refinancing is actually an excellent way to lower interest rates and monthly payments. Refinancing refers to the acquisition and use of a new auto loan to pay off an existing auto loan. The new car loan usually carries a lower interest rate which results in lower monthly payments. In this manner, auto refinance loans can help replace a bad car loan with a better one. Prior to borrowing auto refinance loans it is important for borrowers to review the steps involved in the process.
Step One: The Gathering
Borrowers should first organize and gather all the necessary paperwork that’s required to obtain financing. Auto refinance loan lenders need a wide range of information prior to approving an applicant for money.
Lenders typically require:
- accident history
- credit check
- bank statements
Most of this information is readily available and maintained by car insurance providers.
Step Two: Credit Check
Since credit scores have such a high impact on a refinance loan’s interest rate, it is important for borrowers to obtain a credit check prior to applying. In the past, borrowers may have had poor credit scores that only made car loans with high interest rates available. Understandably, many borrowers want to change this once they have improved their credit score. By being better informed about their own credit score, applicants can ensure there are no discrepancies that may wrongly limit their refinancing options.
Step Three: The Hunt
Borrowers need to use a large amount of discretion when searching for an auto refinance lender. Thanks to the internet’s importance in reaching customers, many scammers have begun preying on unsuspecting applicants. Borrowers should remain alert when searching for a lender and should take care to review each lenders’ policies.
Certain lender policies actually affect which borrowers they can and cannot take on as customers. Some lenders will not be able to offer refinancing for borrowers with certain credit scores. Additionally, borrowers should be on the lookout for any fees that may be charged, such as closing costs.
Step Four: Agreeing
Once a borrower decides which lender to go with, then it is time to review the offered contract. A borrower should review the contract agreement in order to be sure the lender has not inserted any hidden fees.
These four steps can help prospective borrowers in their auto refinance loan process. By being informed about the refinancing process borrowers can raise questions when they speak to a lender. Informed borrowers are in a better position to negotiate and avoid any pitfalls as they seek an auto refinance loan.