If you are one of the many Americans whose credit score was damaged by the recent recession, you may have had little choice but to finance your vehicle at a high-interest rate. Fortunately, there are options to help you afford the car that you need, even if your credit score is not yet as high as you would prefer.
Understand What Information Interest Rates Are Based On
The interest rate that a lender charges will be based on several factors, not just your credit score. Your age, income, down payment, employment and the amount of money you are borrowing are all important factors that are considered. Your credit score is considered, but it is not the only aspect that is considered and other factors may be able to mitigate the damage.
It is obvious that at least two of those will have changed since you got the original loan. You will be older and you owe less on the car, while being older implies maturity and often goes along with long-term employment. As a result, you may be seen of as less of a risk and therefore might be able to get a lower rate of interest.
Make Sure That The Vehicle You Are
Many lenders will not offer car loans for a vehicle that is more than five years old. They are also reluctant to finance any vehicle that is not in good shape. The lender you choose may require a report from a mechanic about the vehicle, so make sure that it
Although you may be able to find a lender who is willing to re-do your existing car loan, it might not be much of a benefit. Make sure that you are choosing a trustworthy bank or lender, to make sure that you actually save money. Some lenders who offer financing for older or damaged vehicles may charge as much interest as the company who gave you the loan in the first place, so don't be fooled.
Make Sure You Refinance At The Right Time
If you only recently purchased your vehicle and realized too late how high your interest was, it is tempting to refinance right away. However, a better idea is to wait at least a few months.
As you make your payments, they will be reported to a credit bureau and even making a few payments on time could improve your credit and help you get a better rate. As mentioned before, your credit score is not the only factor that is considered by lenders, but it is still important.
In conclusion, refinancing a car loan can be intimidating, but it does not have to be. It is actually a very responsible choice to make and can help you financially for many years to come.