Refinancing a car loan means availing a new loan, to pay off an existing loan. The vehicle is pledged as collateral. Refinancing a car loan makes sense if:
1. Your credit score was bad and has now improved. A good credit score helps in availing car loans at lower interest rates.
2. You are dissatisfied with the current car loan terms.
3. If you are experiencing financial problems and wish to extend the loan tenure.
4. Your salary is hiked and you want to settle the loan quickly.
5. If you have surplus funds at your disposal and wish to utilize them to close the car loan early.
Want to know more on Car Loans? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
1. Check the outstanding loan balance.
2. Check the remaining loan tenure.
3. Know the current interest rates.
4. Verify if there are prepayment penalties.
Before opting for refinancing a car loan, collect loan and vehicle documents, check credit history, compare loan offers and evaluate whether refinancing makes sense for you.
1. Collect documents
2. Evaluate your credit history
3. Apply for car loan refinance
4. Run the numbers
5. Decide if refinancing makes sense
6. Evaluate the terms of your loan
7. Complete the process
Collect car documents like registration documents, and car loan documents like the original loan contract. Check if a prepayment penalty is applicable. If loan documents are misplaced, contact the lender’s customer service department. They’ll provide you with information and even mail a copy of the contract.
For the new car loan, you’ll need the following documents:
Paying EMIs on time for a year or more, improves credit score. A good credit history means lower interest rates. So, before approaching banks for car loan refinance, know your credit score.
Compare interest rates offered by various lenders or bankers and shortlist the best ones. Be careful not to apply for refinancing with many lenders. Hard enquiries imply that you are credit hungry. It will lower the credit score.
Refinancing a car loan makes sense if you can make significant savings. If interest rates are going up, it may be wise to opt for refinancing. When doing calculations if you find out, there’s no scope of making huge savings, refinancing might not be a good idea.
Go through the terms of the loan. To pay off the loan quickly, opt for higher EMIs. This will shorten loan tenure and save money in the form of low interest payouts.
If you can’t afford high EMIs, opt for longer loan tenure. With this option, you’ll have to pay more interest in the long run.
Once you decide on a particular lender, complete the application process. Read the new loan contract carefully before signing on the dotted lines.
The new lender will pay off the old car loan and you’ll begin making payments to the new lender.
Shortlist a car that suits your needs. Decide on the brand and model. Search and compare cars. Once you identify the car, initiate the car loan process.
Check your car loan eligibility. You will find car loan eligibility discussed below.
Make sure you choose the tenure and EMIs that you are comfortable repaying. Defaulting on loans adversely affects the credit score. Use online Car Loan EMI Calculators to calculate eligible loan amounts.
Collect all the required documents to apply for a car loan. Documents required for car loan are discussed later in the article.
Finally, apply for a car loan either online or visit the lenders to complete the formalities.
SEE ALSO: How To Pay Off Home Loan Faster?
Following are the documents to avail a car loan:
Income proof: Latest salary slips, Form 16.
Car loan interest rates vary from bank to bank.
If done right, refinancing a car loan gives many benefits to the borrower:
Keep your Financial Cognizance up to date with IndianMoney App. Download NOW for simple tips & solutions for your financial wellbeing.
Be Wise, Get Rich.
This is to inform that Suvision Holdings Pvt Ltd ("IndianMoney.com") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.