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Auto Refinance Rates

Refinancing your auto loan for the purpose of lowering auto refinance rates is one of the most common reasons that people decide to refinance their auto. Your refinancing interest rate will depend on a number of factors, and how they have changed since your original purchase.

You may wonder, "Why would I be able to get a lower rate now than when I signed on my current car loan?" There are a few possible answers to this question:

  • Your income increased for some reason, such as a better job, a pay raise, or a secondary source of income. An increase in income can change your debt-to-income ratio and can reflect positively on your interest rate.
  • Your debt balance decreased. Perhaps you paid off a large credit card balance, another auto loan, or some other installment account. Decreasing your overall debt certainly changes your debt-to-income ratio for the better.
  • Your credit rating improved. When you bought your car, did you have any recent past-due payments on a credit card, mortgage, or other installment account? Your credit score is a fickle thing. It can go up and down frequently, and any activity by you, either good or bad, can affect your score in short order. Your score may have gone up due to keeping current on monthly payments, closing some old credit accounts from department stores or gas stations, or by paying off some balance on a credit card or other account. All of these things can increase your credit score in only a few months, and a higher credit score can mean a lower interest rate on your car loan.

Tips To Lowering Your Interest Rate

If you got your current car loan at the dealership, you may not have the best rate you can get. If you refinance now, a lender will fully examine your credit and financial situation and offer an interest rate accordingly. When financing at a dealer, you're generally grouped into "Prime" or "Sub-Prime." If your score is low-to-average, you may be clustered into "bad credit customers" and end up paying 21% or higher even though you can possibly get a lower refinancing interest rate.

Keeping your credit profile on track is generally the most important aspect of credit approval, aside from actually having a steady income. There are, however, a few other things you can do to help increase your chances of getting approved for lower auto refinance rates:

  • If you've just started a new job, work at it for at least six months before applying for a refinance.
  • If you've just moved to a new place, stay there at least six months before applying for a refinance.
  • Having a salary-based position is ideal. Self-employed and 1099 employees are a bit more complicated to lenders
  • Past credit activity such as a previous auto loan or mortgage that was in good standing always looks good to a potential lender.
  • Have a good debt-to-income ratio. This may be the most important aspect of finance approval. If you owe as much or more than you earn, a lender doesn't want to lend you more on top of that because you are a high risk of not being able to pay them back. Try to pay down your credit card and other revolving account balances before applying for auto refinancing.
  • If you've had a bankruptcy in the last couple years, you probably already know that you can get approved for an auto loan, but you have very little chance of being approved for a lower interest rate any time soon. Wait 2 or 3 years after a bankruptcy before trying to refinance.

"My monthly payment went down by almost a hundred dollars per month, and applying was so easy!"

Jennifer H.

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Still Have Questions?

Still not sure if auto refinancing is right for you? Learm more about car loan refinancing in our section of Frequently Asked Questions.