Is your monthly car loan payment too high? If so, you aren’t by yourself. Car refinance interest rates are a popular move for many car owners, and one that allows you to trade in your loan to replace it with a loan that has lower interest rates. Your monthly payment may even drop, and you might save thousands of dollars over the length of the loan!
In this blog, we’re going to discuss everything you need to know about Car Loan refinancing, including understanding the process of refinancing, to learning how to qualify for the best car refinance rates.
Simply put, car loan refinancing is getting a new auto loan from a different loaner to replace your current loan, usually with better terms. This might mean better rates, longer repayment periods, or even borrowing more money. It is especially beneficial for those whose credit score, financial situation, or circumstances have changed since getting your original auto loan.
When you refinance, your new lender pays off your old loan and your old lender closes out your loan account. Your new lender opens up a new loan account with them. The objective is to lessen your financial burden. This is why it is crucial to compare the best car refinance interest rate to the loan amount your lender is willing to give you.
There are many valid reasons to refinance your auto loan, especially if saving money is a priority. Here's how you can save.
1. Lower Interest Rates
A large number of people refinance their auto loans as they tend to find lower interest rates during their loan term. Even marginally lower interest rates can create significant savings over the term of the loan. For example, Mahindra Finance's car refinance interest rates begin at 10.5% p.a. this is a competitive deal compared to what can often be found in banks, which have higher interest rates and less flexibility with terms.
2. Reduced Monthly Payments
A lower interest rate or extended loan term could reduce your monthly payments, which could help create a little more budget space for other expenses each month.
3. Better loan terms
Do you want payment flexibility or the ability to make prepayments and not be penalized? Many lenders provide this to their refinance customers, possibly making repayment stress-free.
Refinancing can be a wise decision, but it doesn't make sense for everyone. Here are a few things you should consider before making the call to refinance:
Credit Score
If you've seen your credit score go up since you took your initial loan, you should have a much better chance to get a lower car refinance interest rate. Lenders reward borrowers with high credit scores with lower rates and better terms.
Current Loan Terms
Look at your current car loan's interest rate and loan term. If your rate is much higher than the current market rates, then refinancing might make sense.
Loan Balance
If you still owe a lot of money on your car, refinancing makes more sense. The more you owe, the greater your potential savings will be, and you will also benefit even more from a lower interest rate over the life of the loan.
Monthly Budget
Are your current payments filling your budget to the brim? It might make sense to lower your payments through refinancing if you are struggling to keep your budget balanced.
Are you ready to refinance? Here is how to get started:
1. Compare Lenders
Take the time to compare different lenders. Look closely at their car refinance interest rates, repayment terms, and any hidden fees. You need to find a lender that gets you to where you want to go.
2. Get Your Documents Together
You will need the details of your current loan, proof of income, proof of address, a valid identification, and bank statements. It is helpful to have these all in order so that you can get approved quickly.
3. Apply
Once you choose a lender, you will then need to fill out their application and submit all the necessary documents. Many lenders including Mahindra Finance have online applications which makes this even easier.
4. Wait For Approval
After the lender has reviewed your documents, they will tell you whether or not you are approved. If approved, they will pay off your existing loan and establish a new loan with your updated terms.
In addition to having the potential for new and lower payments and a lower interest rate, refinancing your car loan can also lead to us some other benefits:
Top-Up Loans
Some lenders, such as Mahindra Finance, allow you to borrow additional amounts when you refinance. This top-up amount can be up to 180% of the value of your car, with a budget cap of ₹47 lakh. You can use it for personal needs, home renovations or to fund a small business.
No Prepayment Penalty
Flexibility is crucial. Many lenders do not charge prepayment penalties, so whatever you can do to pay ahead earlier if your circumstances improve can now be up to you!
When considering offers, you should always remember to assess using an online calculator and EMI calculator for car loans. This will show you our estimated payment every month as well as how much interest and payments you can save when you have updated rates for car refinance.
Conclusion
Car loan refinancing is an effective way to improve your financial situation. Given competitive car refinance interest rates, better loan terms and available top-up loans, there has never been a better time to consider refinancing your loan.
Whether you are looking to save on monthly payments or just want more freedom in your budget, refinancing can help provide you with some financial ease. Take control of your finances, reduce your stress and get started on saving today.
FAQs
Q1: What is the eligibility for a car refinance loan?
To be eligible, you generally will need a good credit score, steady income, and a minimum number of EMIs paid on your current loan. Each lender may have slightly different criteria.
Q2: Can I transfer my car loan to a different bank?
Yes, a car loan transfer is a type of refinancing. If you refinance your car loan with a lender with higher car refinance interest rates yes, you can potentially save on payments and have better loan terms.
Q3: Will refinancing my car loan lower my credit score?
Yes, refinancing your car loan will involve a hard check on your credit which may lower your credit score slightly. However making consistent payments on your new loan can help improve your score over time.