Thinking about refinancing on your used car loan? Refinancing is a great way to save a ton of money on your car loan. Interest rates are extremely low right now, so if you have a high rate it's definitely worth looking into. Unlike refinancing on a home, refinancing a car loan is a very quick process, and the cost of doing so is minimal. Here are some things you can expect if you decide to refinance your car loan.
1) Credit History
If you decide to refinance your car loan, whether through your current lender or a third party lender, you can expect that they will take a look at your credit history. In general, your credit report is a good indicator of how responsible you will be with the refinanced loan. The higher your credit score is, the less risk that is perceived by the lender. If you have a lower credit score presently, you may want to wait to refinance until you can build a more recent history of timely payments on your debt, or pay some of the debt you owe down.
2) Proof of Insurance
Of course it goes without saying that the company you choose to refinance your loan will want to make sure you are legally able to drive the car! You will be asked to present your driver's licence, as well as proof of insurance on the vehicle in question. In some cases the lender may require you to carry comprehensive and collision insurance, to protect the value of your car should it be wrecked.
3) Proof of Income
Your lender will want to know that you have the means with which to pay for your refinanced loan, so you will be asked to show some proof of income. In most cases, recent paystubs will be the easiest way to do this. If you are an independent contractor or self-employed however, there are other ways you can show proof of income. Bank statement can show records of your direct deposits from your clients, or you can show your tax return if you have many clients and want to show a summary of what you made last year. Rental income and alimony can also be considered as sources of income as well.
Refinancing a car loan is a relatively painless process and can usually be done on the same day that you apply. By having the required documents, you'll be able to make the process go just that much faster.