Refinancing a Car Loan - What Lenders Look For

If you are able to refinance a car loan at a lower interest rate than what you originally obtained you may be able to save as much as $100 a month on your car payments. While the process of learning how to refinance a car is simple, meeting the requirements that are set forth by the financial lenders might be difficult. Companies that offer car financing have a list of requirements that must be met before they will consider offering you a new auto loan. The following are some of the requirements that must be met in order to refinance auto loans.

Car financing companies will require that the value of the car must be more than what is owed on the loan. Sometimes people will try to refinance a car when they owe more than what the value of the car is worth. Almost all lenders will offer a car refinance option if you are in an upside-down loan. To get out of the upside-down loan and possibly qualify for an auto refinance you will need to pay more than your monthly car payments in order to lower the amount that you owe on the car. Once the amount is lowered you may qualify for a new loan that can be used for financing a car.

Another requirement car financing companies will look for when people try to refinance car loans is how much you owe on the car. All financing companies require that you owe more than $7,500 on your existing car loan in order to qualify you for a loan to refinance a car. Some financial lenders may waiver this minimum requirement but it will require you to fill out extra paperwork. The minimum amount required on an existing auto loan is set because an auto refinance will extend your loan payment, and it isn't cost-effective for amounts less than $7,500.

The last requirement needed to refinance a car is a fair or good credit score. A good or fair credit score will ensure that you are getting the best possible interest rate a financial lender can offer you. Getting an auto refinance is still possible with a bad or low credit score, but you may not be offered the best interest rates. Knowing what lenders are looking for can help you prepare for the process required to obtain an auto refinance and help you get the best possible interest rates and loan terms possible.