Refinancing Steps and Options for Car Loans UK

By | June 22, 2019

Best Options and Steps to Refinance My Car Loan UK

Refinancing your car loan is comparatively easier as compared to refinancing a mortgage. This not only saves thousands of dollars on interest but also helps you to pay off your car fats comparatively. Here we will check steps to refinance My Car Loan UK. Let us now see what process is involved in refinancing and also whether it is a good option or not.

Refinance My Car Loan UK

Decide whether it is the right time to refinance your car loan

You need to decide whether it is the right time to refinance your auto loan. You need to have keen eye on the current market status and your personal financial position.

You should consider refinancing your car loan in following cases:

  • If interest rates have gone down since you purchased your car.
  • You qualify for better rate due to improvement in your credit score.
  • If you have financed your car through dealership, then it is better that you look for other good options as rates are comparatively higher through dealer financing.

What you should know before refinancing?

Refinancing does not require many documents like mortgage. You need to have, a copy of current loan papers of yours and information about your vehicle such as current mileage and VIN.

Refinancing your car loan in 6 steps

If you wish to refinance your car loan, you need to follow the steps mentioned below:

I. Evaluate the terms of your present auto loan: It is necessary that before buying the new auto loan, you should be aware of the fact that where you actually stand with your current loan.

  • What is your interest rate?
  • What duration of time is left of your loan?
  • You should be clear about what is your actual payoff amount. Payoff amount is the amount that you need to pay in case you pay off the entire bill to the lender today.
  • Is there pre-payment penalty applicable? There are only few lenders who allow to pay off the loan every year without paying any penalty.

II. See if your car qualifies: Each bank has their own criteria and qualifications to give loans. However, most of the banks will not be ready to refinance your vehicle if the vehicle or loan does not fulfill following criteria:

  • Your current loan must have less than $7,500 remaining.
  • Your car must be older by seven years or more.
  • Your car must have cover 100,000 miles or more than that.
  • Your car is used commercially.
  • Car possesses salvage title.

III. Compare rates of different banks: Check the interest rates of different banks in your area. You can either call the banks or can visit sites like bankrate.com to get an idea.

IV. Calculate your savings while refinancing: To calculate your savings, you can use online auto loan calculator.

V. Apply for the refinance loan: If after calculations, you come up to the conclusion of refinancing, look out for all the details now. Some of them are mentioned below:

  • You must clearly ask the bank whether it expects you to pay some fee. One can expect a transfer fee for the title and re-register fee. Be careful as some banks do take processing fees too.
  • Also be sure whether there is some pre-payment penalty for the loan. You will have to avoid this as with this clause you will be penalizing to pay off early loan.
  • Once you are satisfied with all the details, chose the bank with the best deal and apply.

VI. Complete your paperwork and finalize your loan: once you finish off with the paperwork, finalize your loan.

Few Tips for Car Loan Refinancing

Remember few tips for auto loan refinancing UK. Few are mentioned below:

  • Only some banks refinance auto loans of other banks. So if any bank turns down your proposal is ready for it.
  • Always avoid the option of cash out refinance. This may prove as best option for home mortgage but definitely not car refinance. This will not allow you to save money as it adds up to length and cost of you loan.

So if you are considering refinancing of car loan UK, do remember the above mentioned discussion to make the procedure easy and simple. If you will be cautious and careful refinancing will not be tedious.

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