NEW YORK, June 8, 2023 (Newswire.com) - OneMain Financial: Applying for a loan isn't difficult with the online lending technology that's available today. However, there are still several actions car owners need to take before they can refinance car loan agreements. To simplify this, we've broken the process down into eight steps. Follow these in the order they're laid out to achieve the best possible result.
1. Review the original car loan agreement
Refinancing means that the original loan will be paid in full by the new loan. Unfortunately, some lenders charge an early repayment penalty for doing that. A good first step is to check the original loan documentation to see if there's a clause about that. It's also a good idea to determine the exact balance owed before applying for refinancing.
2. Check your credit score
A higher credit score could equate to a lower interest rate and better payment terms than what was offered with the original loan. A lower credit score could mean just the opposite. Car owners should check their credit scores before attempting refinancing to avoid surprises after submitting applications.
3. Get an official vehicle appraisal
The value of the car and the amount of money still owed are two key factors in getting approved for auto refinancing. An official vehicle appraisal is the best way to find out the exact value. An alternative to that is the Kelley Blue Book, which will provide an approximate value based on the year, make, and model of the vehicle.
4. Make digital copies of necessary documents
Most lenders have an online portal where loan applicants can upload documents required for approval. These include a driver's license, vehicle registration, proof of insurance, proof of income, proof of residence, and a 10-day payoff statement from the original lender. It's best to make digital copies of all these documents for online use.
5. Search online for auto refinancing lenders
Most traditional banks and credit unions offer auto refinancing, but it's possible to find better rates and terms with online lenders. It's best to have multiple choices. An online search for lenders specializing in refinancing can provide additional loan options compared to the more traditional choices available at brick-and-mortar financial institutions.
6. Submit pre-application forms
A pre-application form initiates a "soft inquiry" on the applicant's credit history that does not affect their credit score. This differs from the "hard inquiry" that will be done when a full loan application is submitted. Pre-application forms are a good way to determine which lenders may approve refinancing and what terms and conditions they can offer.
7. Compare rates and terms
The pre-application offers should provide enough information to make a side-by-side comparison of interest rates, fees, and payment terms. These could vary widely between lenders, so reading the fine print is important. Many borrowers confuse interest rates with the annual percentage rate (APR). They are different. The APR includes fees the lender charges on top of interest.
8. Sign the loan agreement
The final step is to choose the best offer and sign the loan agreement. Read the terms and conditions carefully before doing this, and ask questions if anything is unclear. This can be done by calling the customer service number or using the online chat feature if the lender provides that on their website. Once the agreement is signed, the original loan will be paid off, and the new payment agreement will usually begin the following month.
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Original Source: OneMain Financial: 8 Steps to Refinance a Car Loan