A Guide to Refinancing Car Loans

If you’ve bought a car in the past few years, you might have taken out a car loan to do so.

But while the loan you took at the time may have been appropriate then, your circumstances might have changed, or you might just be wondering whether there are better options.

Refinancing a car loan can sometimes make sense. You may be able to access lower interest rates, reduce your monthly repayments and give yourself some additional financial flexibility.

But there are also some important things to note. Here’s an overview of the information you might need.

What is car loan refinancing?

Car loan refinancing refers to the process of paying off your existing car loan by taking out another.

Usually, people might consider this if they are looking for better terms on their loan, such as a lower interest rate, an extended term of the loan, or even an increased loan amount, if you’re not able to get that from your current provider.

When might you consider refinancing your car loan?

There are a few reasons why it might make sense to refinance your existing loan terms.

Improved credit score

If your credit score has improved since you took the loan, or your financial situation generally has changed for the better, you may be able to qualify for lower interest rates. This is particularly the case if you are currently with a higher-interest lender who can’t offer you a different rate. We could help you look at what might be an appropriate fit for your new situation.

Falling interest rates

If you took a loan with a fixed interest rate when interest rates were higher, you may find that there are now lower interest rates available. In these situations, it’s worth checking what fees you might be charged for breaking the terms of the loan.

You’re struggling with payments

If your payments are now too high – maybe you’ve hit a financial rough patch – you might be able to refinance your loan to extend the term and lower your payments. This will likely end up costing more overall, but can help from a cash flow perspective. However, if you’re finding your current payments a bit much, it’s generally a good idea to talk to your existing lender about options that may be available for you before you consider a switch.

Steps to secure better terms

If you’re thinking about refinancing, there are a few steps to work through.

Evaluate your current loan

Check the balance remaining on your loan, the interest rate you’re paying and how long is left to pay it off. It’s also a good idea to check what fees there might be associated with paying it off early.

Check your credit score

If you have a higher credit score, you may have more options when it comes to finding a new lender. This is particularly the case if your score was poor before.

Look into your options

better finance™’s team of financial advisers can talk to you about what might be available and which lenders might be a fit for you.

Use loan repayment calculators

Tools like better finance™'s repayment calculator can help you to see in real terms what a change might mean, depending on the interest rates you expect to be offered.

Apply for preapproval

We can help you get preapproval to understand what you might be able to achieve with a refinance, before you completely commit.

Common mistakes to avoid

Watch out for some common fishhooks to help your refinance process run more smoothly.

These are some common mistakes.

Not getting advice

better finance™'s team can talk to you about what might be possible, understand what you want to achieve through refinancing, renovation loans, and which lenders might be a good fit.

Ignoring fees

There could be early repayment fees and establishment fees to factor into your calculations.

Prolonging loan terms

Try to avoid extending the term of your loan unless you really need to. It can make your loan more expensive.

Do you have questions about refinancing your car loan? Our expert team is here to help with any queries you might have.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.