What is Car Loan Refinancing?

Car loan refinancing is essentially a redo on your current car loan. You go back to the Brantford dealer with a new financial situation and then redo the terms of your contract to be something else.

Why would you want to do this? Well there are a few reasons. The most clear is to try and secure a lower interest rate. If you had bad credit when you applied for the original car loan, and you’ve now been able to improve your credit score, you should be able to get a better interest rate on the loan.

you‘ll also be able to extend the duration of the loan, meaning lower monthly payments, which can be useful depending on your situation. Or, alternatively you can decrease the duration for higher monthly payments but the ability to pay off the loan quicker.

How do you Refinance a Car Loan?

It’s not quite as simple as calling up and asking but that is the essence of it. Before you can ask, you’re going to need to secure some documents to refinance a car loan in Brantford. You’ll need all the personal stuff you normally need like your SIN number and your address. You’ll also need proof of income.

You’ll need proof of car Insurance and all the information on the car: Make, model, mileage and age primarily.
 
After you’ve got your information you can shop around and find the best place for a refinance that gives you the terms you’re looking for.

Should you Refinance your Car Loan?

The real question is: Should you refinance? Is it right for you? And that really depends on your current financial situation.

If you got the loan with bad credit at a predatory rate and are now in a more secure financial position, with good credit then it’s most likely worthwhile to do. If on the other hand you’re basically in the same position as you were when you got the loan then you’ll probably just end up with a similar loan.

It can also depend on the age and value of the car. There comes a point where refinancing the loan is kind of silly since you might end up paying more for the car than the cars actually worth.

If you’re looking to refinance in order to pay off the loan early, make sure your current loan doesn’t have a prepayment penalty, a little clause on the loan that means you have to pay a fine if you pay off the loan earlier than the contract specified.

Misconceptions about Car Loan Refinancing

You won’t be approved with bad credit: The most common reason for car loan refinancing is to find a better deal on a loan when credit score is improved. However, you can still refinance a car loan when you have bad credit. It may not be easy, but might still be worth it.

When it comes to interest rates, your credit score is not the only denominator. They are also determined by external factors such as world events and the general financial situation of Canada. So consider that even if your credit hasn’t changed, maybe the world’s credit has!

You will be automatically approved with good credit: Contrasting from the previous point, just because your credit score has improved doesn’t mean you have guaranteed approval for car loan refinancing in Brantford.

Lender’s policies are sometimes also determined by the car’s age, make, model, and total amount left on the loan.

It’s not worth shopping around: Many people say that you should shop around for refinancing (or loans in general) because it will damage credit score. This is technically true but it’s not nearly as bad so people thing.

Too many hard inquiries into your credit history in a short period of time can lower your credit score, but not by much! We believe that the risk of lowering your credit score a small amount is worth shopping around and saving on an even better deal.

You cannot refinance an upside down load: By upside down loan, we mean a loan that you currently owe more on than what the car is actually worth.  This is normal and will usually happen in the first few months of ownership. The car is at it’s highest rate of depreciation. Many people think this excludes the loan of refinancing but that’s not the case!

In-fact, most lenders will factor some level of negative equity into their policies. They have limits on how upside down the loan can be (such as 120%), but regardless it’s still possible to be approved for an upside down loan!

Ready for your next vehicle? Click here to get pre-approved online with us at Click to Drive in Brantford, or click here if you have any questions or inquiries about car loan refinancing in Brantford!