If your current auto loan is not satisfactory, you may be desperately seeking to refinance. You may have failed to qualify for good lending terms when you first got the loan because of poor credit or prevailing high interest rates. However, auto refinancing may get you a better repayment deal by replacing your current loan with another loan that has a better interest rate, loan term, or both. While finding a lender willing to refinance a car loan older than 10 years may be challenging, the following tips could make it easier to secure a good deal for your older car.
Here’s how to find a suitable auto refinance deal:
Before seeking a lender, be sure that refinancing your old auto loan is the right move financially. Some scenarios that are grounds for refinancing are:
Even with a good reason to refinance, whether or not to proceed with auto refinance for older cars lies in the costs and benefits. If refinancing costs more than you would save, proceeding is likely not a good idea.
In addition, do not refinance if you’re about to finish paying off the loan because it may not save you money. Most lenders require a minimum balance of $3,000-$7,500 to qualify, and although you can refinance even with less than a year left on your auto loan, you’ll be required to pick a loan term of not less than 12 months, which will lengthen your loan term and increase your interest payments. If this is your situation, it would be best to finish paying off your current loan and not seek refinancing, for which you might not qualify, especially if you’re seeking to refinance a car loan older than 10 years.
Getting auto refinance for older cars might also not be a good idea if you owe more on your car than it’s worth because the value of your vehicle is the loan security. If the lenders cannot recoup the entire principal if you default, you’ll likely not get the loan. Lastly, do not seek refinancing when the interest rates are high to avoid paying more than your current loan demands.
Your lender will need to know your car’s worth to estimate risk, and for this, car valuation experts like Edmunds and Kelley Blue Book will come in handy. However, keep in mind that lenders may not be willing to refinance a car loan older than 10 years or with more than 100,000 miles. Older cars’ resale value is often very low, and the lender might not recover its money in case of a resale. Refinancing will, therefore, only work and save you money if your car has a low mileage and a great resale value, for which you should have amassed substantial equity.
It’s always best to get pre-approved first by at least three lenders before you apply. This lets you see the amount you qualify for and know what information you’ll be asked to provide when you finally apply. To prequalify for an auto refinance loan for older cars, have information about your vehicle and the current loan and proof of your residency, insurance, and income. Comb through these details to ensure you’re not missing anything and that there are no errors.
Even if you get a great deal on your first ask, it’s best to shop around. See what online lenders, credit unions, and banks are offering you. Compare their rates and choose the most suitable option. Choose an offer that aligns with your personal financial goals and preferences and proceed to make the auto refinance loan application.
Auto refinance loans for older cars can significantly impact your finances and bring breathing room where none existed. However, it’s only an option when you get better terms and can save money. Evaluate your current loan against the refinance requirements, the time remaining on your loan, your credit standing, and the prepayment penalties. If the savings outweigh the costs, approach your preferred lender. While you’re at it, why not shop for a better deal on auto insurance, too?
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