A car loan can be your only option on affording a car. Before you apply for car refinance, you need to check your finances to know how much you can afford. The monthly loan payment should ideally be less than 20 percent of your total income. When negotiating the cost of the loan, the salesperson may give you different monthly options.
Before you start calculating the monthly payment you are likely to pay, you should know how much the vehicle will end up costing with whichever option you choose. The key thing to remember is that the longer the term of the loan, the more you will end up paying. A car loan calculator can help you know estimates of monthly payment under different terms.
Applying for car refinance with a longer term is likely to leave you with “upside-down” cost. This means that the cost of the loan will end up being more than the value of the car. This is not a problem if you do not plan to resell the car during the term of the loan. However, if you will want to trade it for another loan, you will have to pay the balance between the value of the car and the amount of loan you owe before your new financing can be approved.
Car refinance that come with shorter terms are usually cheaper in the long run. The lenders will charge you a lower interest rate. However, you will need to pay higher monthly payments.
Do You Qualify For Car Refinance?
Before you start searching for a car loan, you should know the qualifications that you will have to meet. Depending on the lender that you are working with, you may have to meet one or more of the following:
1. Be employed and getting an income of at least $1600 per month
2. Be a US citizen
3. Have not had a repossession in the past one year
4. Have a stable employment and residential background.
The lender will want to know that you can pay back the car refinance loan. This is why they will require you to show proof of income. Most of them will ask for copies of your recent pay stubs or a letter from your employer.
Your current state driver’s license will also be required. You must apply for an auto loan from a lender serving your state. If your have a driving record with blemishes, some lenders may not accept to finance you. If you are lucky to get financing, you may be charged higher interest rates and fees.
You must also be stable financially to be approved for car refinance. If you have had repossession during the past one year, getting approved for financing may take some time. Mainstream lenders will not accept to finance you. Your option would be to apply for a loan from subprime lenders. These lenders offers bad credit auto loans to people with zero credit past, those who are bankrupt and those who have had a recent repossession.