How to refinance a car loan once rates drop

One of the most effective times to consider refinancing your auto loan is when rates have lowered and your credit score has improved. The process is fairly similar to the steps taken when applying for your initial loan.

Evaluate current loan. Before beginning your refinancing process it is first important to look at your current loan, both the terms and exact interest rates. Use an auto refinance calculator to understand potential monthly savings once you have those numbers in mind.

Check your credit. By understanding your credit score you can determine where you land in terms of available lenders. When it comes to refinancing — just like with any loan — the better your credit, the more competitive your rates will be.

Find vehicle value. Depending on the value of your vehicle, refinancing might not always be the best financial move. If you have almost paid off your vehicle, it is not wise to refinance.

Shop around comparing at least three different lenders is the key to getting a good deal. A great starting point is the bank or lender that you initially signed off with — there may be discounts for current customers. Though not all lenders let you refinance an existing loan.

Receive new terms. After submitting the necessary documentation and in some cases paying a prepayment penalty, you will receive your new terms. Before closing the chapter on this process be sure that you pay off your previous lender