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Car loan refinancing can help you save money by securing a lower car loan APR and/or changing your repayment period, but how will it affect your credit score? Here’s the short answer: Any time someone performs a hard check on your credit, as lenders will for you to get approved for a new car loan, your credit score drops slightly. However, with consistent on-time payments, your credit will quickly recover or even improve.Read this guide to learn:The basics of credit scoresWhat credit score you need to refinanceHow refinancing specifically affects your credit scoreHow some people improve their scores after a refinanceWhen not to refinanceThe timeline for credit score recovery after a refinanceSteps to raise your credit scoreThe most important thing to do to limit how much your credit score is lowered by refinancingWhat Happens To Your Credit Score When You Refinance A Car: The Complete GuideCredit Score BasicsWhat is a credit score?What is a FICO score?How are credit scores calculated?Where does the information on your credit report come from?1. What Is A Credit Score?Credit scores are three digit numbers that are designed to tell lenders how likely you are to repay your debts. They indicate how financially stable you are.2. What is a FICO Score? FICO credit scores are the most popularly cited scores, but FICO is merely a type of credit score model (FICO stands for Fair Isaac Corporation, the company that helped pioneer credit scoring). Most agencies use either a FICO model or a variation of it for credit score calculations.3. How Are Credit Scores Calculated?Credit scores take a look at five major categories in your finances:Payment historyAmounts owedLength of credit historyCredit mixNew creditEach category is weighed differently, but each part is important to ensuring that your score is as healthy as possible. Credit scores are calculated by looking at monthly reports that are sent to the three major credit bureaus (Equifax, Experian and TransUnion). Your Payment History (35%)Your payment history is the most important factor in your credit score, accounting for 35% of your total score. Do you pay your accounts on time and in full, or do you miss payments? If you have had a missed or late payment, its effect on your score will depend on:The amount you’ve missedHow recently you’ve missed a paymentHow frequently you’ve missed paymentsEnsuring that you make consistent, full, and on time payments will have the greatest positive effect on your credit score.Amounts Owed (30%)This is the second most important category for your credit score, accounting for 30% of your credit score. The amounts owed category looks at how much money you owe, how much money you have available to you, and the number and types of accounts you have. The most important factor in this is your credit utilization ratio, which is a ratio of how much money you owe compared to how much money you have available to you. This looks at individual accounts as well as your total debt and total line of credit. Your ratio should be less than 30% for each account as well as your overall amounts owed.Length Of Credit History (15%)The length of your credit history makes up 15% of your credit score. This category looks at how long your accounts have been open and active. How long have you had your accounts open and how long has it been since you’ve used certain accounts? The longer you have a history of having open accounts, consistently using them, and consistently paying them, the higher your score will be.Credit Mix (10%)Your credit mix accounts for 10% of your credit score. Your credit mix looks at how diverse your credit accounts are. Lenders like to see that you can manage payments for a number of different accounts. Healthy mixes typically include installment loans, mortgages, car loans, credit cards and retail credit cards. The better the mix, the better your score will be.New Credit (10%)Your new credit counts for 10% of your credit score. This category looks at how many new accounts you have. If you have new accounts that you haven’t proven that you can consistently pay, it will count against you. New accounts are like unanswered questions to credit bureaus.4. Where Does The Information On Your Credit Report Come From?Many different organizations send reports to the bureaus, including:Mortgage lendersAuto loan lendersCredit card companiesPersonal loan lenders Medical billing collection agenciesUtility companies typically do not send reports, but missing utility payments can result in reports to a collections agency (which will be reported). The credit bureaus take all of these reports and break the information down into the following categories. What Is A Good Credit Score To Refinance A Car?Credit scores are broken down into five categories: Exceptional (Super Prime): 800-850Very good (Prime): 740-799Good (Near Prime): 670-739Fair (Subprime): 580-669Very poor (Deep Subprime): 300-579The better your credit score is, the better car loan APR you will be offered. The best car loan refinance rates are offered to those with very good and exceptional credit scores. But that doesn’t mean that you will be unable to refinance if your score isn’t quite that high.If your credit score is better than it was when you originally financed and/or the market rates are better than when you initially financed, there’s a good chance you will be able to qualify for a better car loan APR.How Does Refinancing A Car Affect Your Credit?When you refinance a car, it affects two categories in your credit score: your length of credit history and your new credit.Because it will be a new loan, it will shorten your length of credit history, which can cause a minor dip in your score. It will also be a new credit on your account, so your score will lower because it's new. Refinancing your car means that you will also have hard inquiries on your account. Hard credit inquiries will also cause a dip in your score, typically between five and ten points. It is temporary however, and they usually wear off in about six months. How Some People Improve Their Scores After A RefinanceWhile refinancing will affect parts of your score, it can also help your finances, and by extension credit score, by saving you money and making your payments more manageable.Refinancing Saves You Money So You Can Pay Off More DebtIf you are able to refinance your car loan to a lower car loan APR, you can save a lot of money over the course of your loan. And those savings can be used to pay down other debts you have. These payments can lower your credit utilization ratio, which can significantly improve your credit score.Refinancing Can Help You Make More Consistent PaymentsIf you are having trouble keeping up on your monthly payments, refinancing can help you by lengthening your repayment plan. When you lengthen your repayment plan you have more time to pay off your loan, which significantly lowers your payments. If you can stay more consistent on your payments, you will increase your score a good deal.When Not to Refinance For Your CreditFor most people, refinancing can help them save money on their monthly car payments. However, because refinancing does temporarily negatively affect your credit score, you should avoid refinancing:Right before making a major purchase that requires a credit pullRight after making a major purchase that requires a credit pullFor example, if you’ve just bought a home, you may want to wait for your credit to recover. And if you are hoping to buy a home in the next six months, you may want to prioritize having your credit score in tip top shape for that.Timeline For Credit Score Recovery After A RefinanceFor most people, any score reduction from refinancing should wear off within a few months to a year as long as you make on-time payments. The hard credit inquiry stays on your report for two years, but is most impactful when it is recent.Steps To Raise Your Credit ScoreWhether you’re building credit for the first time, want to get your credit score in tip-top shape before refinancing, or plan to use these steps to raise your score up after refinancing, here are some actions you can take to give your credit score a lift:Make consistent, on-time paymentsRequest higher credit limitsAvoid opening new lines of creditAsk to be an authorized user on an existing accountReview your credit reportWork On Making Consistent, On-Time PaymentsIf you have a habit of making late payments, try to fix this as soon as possible. Sign up for autopay on your bills if possible to ensure you don’t miss a bill and look for ways to keep up on full payments. Are there areas of your budget where you can make sacrifices to save a bit of money? Canceling unused or unnecessary subscriptions and switching to generic brands are just a few ways you can free up some extra money and ensure you are making full payments on all of your accounts.Request Higher Credit LimitsContact your credit card companies and ask for higher credit limits. This will automatically give a boost to your credit score by reducing your credit utilization ratio.Avoid Opening New Lines Of CreditAny new accounts that you open at this time will adversely affect your credit score, so try to resist opening anything new until after you refinance your car loan.Ask To Be An Authorized User On A Loved One’s AccountIf you have a friend or family member with a great credit score, becoming an authorized user on one of their accounts can give your credit score a boost. Their on time payments and low credit utilization ratio can help to give yours a boost.Request A Copy Of Your Credit ReportIt’s a good idea to request a copy of your credit report at least once per year to ensure that there aren’t any mistakes or errors. A missed payment marked in error can have a significant effect on your score, so it’s good to regularly review your report and make sure everything is accurate.When you decide to refinance your car, be sure to apply to all lenders in the same two week time frame. Credit bureaus know that people need to apply to different places in order to compare, so they give a two week window where all hard inquiries will count as one inquiry (and therefore only affect your credit score once.The Most Important Thing To Do To Limit How Much Your Credit Score Is Lowered By RefinancingWhen you decide to refinance your vehicle, you’ll want to shop around for offers from several different lenders to ensure you get the best deal available to you for your unique financial circumstances. However, if you choose to do this, you must be sure all the credit checks fall within the comparison shopping window allowed by the credit bureaus, which is typically 14 days, up to 45 days. When you do this – as long as the inquiries are all for the same type of loan – it’s counted as one inquiry instead of several on your credit report.At Auto Approve, we gather offers from many top lenders at once, which means you can be sure all credit checks are done in a short window, with no need for you to find and manually request checks across several companies.In short: Refinancing A Car Loan Can Cause A Slight Dip In Your Credit Score, But It Can Also Be Beneficial In The Long Run.Refinancing your car loan is easy when you use a company that specializes in car loan refinance, like Auto Approve. Our representatives will connect you with offers from top lenders, guide you through your options, then do the paperwork for you.Get a no-commitment quote from Auto Approve today to see how much money you could be saving!

Whether you want extra cash for a specific goal or are just looking to revamp your budget with inflation and rising costs, lowering your motorcycle payments can help open up some extra cash month to month – but how?Here’s the short answer.The only way to lower the monthly payment on a motorcycle loan is to change your loan terms, either by modifying your loan with your current lender or refinancing your loan. For most people, refinancing will be the better option, because you have more leverage when changing loan providers and can usually get more favorable loan terms that way. The exception would be if you have particularly bad credit or are otherwise not a good candidate for refinance.Read on to learn how motorcycle financing and refinancing works, what makes someone a good candidate for refinance, and the steps to start your refinance and secure a lower motorcycle payment.The Complete Guide to Lowering Your Monthly Motorcycle PaymentIn this guide, we’ll cover:How motorcycle loans workHow refinancing can lower a monthly motorcycle payment What determines motorcycle loan APRs (Annual Percentage Rates) How to make yourself a good refinance candidateThe steps to refinancing a motorcycleHow Motorcycle Loans WorkA motorcycle loan is a secured loan used to help finance a motorcycle. A motorcycle loan works the same way as a car loan. A financial institution (the lender) pays for your motorcycle, and you in turn repay them in monthly installments with an additional fee, interest, for the convenience of borrowing money. Your motorcycle is considered collateral, and if for any reason you cannot repay the lender, your motorcycle will be taken away (and any money you already paid will not be returned). The term “secured” refers to the use of collateral.Motorcycle loans have a principal, which is the price of the motorcycle, plus any taxes and fees, minus any down payment you make. This principal is the base of your loan, and then interest will be applied to that principal. The interest is calculated using a motorcycle loan Annual Percentage Rate, or APR, which is based off of market rates and off of your personal financial situation. How refinancing lowers monthly motorcycle payment In short: Refinancing can lower your payment through securing a lower interest rate, changing the loan term, or both.When you refinance, you are paying one loan off with another loan. The new lender pays off the old loan and you repay the new lender in monthly installments. The new loan will have a different APR and repayment plan, ideally with better terms for your unique financial situation. By securing a lower APR, you can save money every month. You can also accelerate your payment plan, which will allow you to pay your loan off faster and save money (lower APRs are traditionally offered to loans with shorter repayment plans). Or you can refinance a motorcycle loan to a longer repayment period and cut your payments every month.Refinancing your motorcycle is the best way to lower your monthly motorcycle payment and save money on your motorcycle loan. What determines the Annual Percentage Rate (APR) on a motorcycle loanMotorcycle loan APRs are determined based on:Market factorsCredit score and credit historyIncomeLoan termThese factors are important to understand if you want to lower your monthly motorcycle payment.Market FactorsThe economy’s performance will help dictate what APR you are offered. Interest rates are set by the Federal Open Market Committee. If they decide that spending needs to be encouraged, they will lower interest rates. In the past several years, interest rates have varied pretty drastically, so whether or not you can save by securing a lower interest rate may depend on when you took out your motorcycle loan.Credit Score And HistoryThe biggest factor for your motorcycle loan APR (that you can control) is your credit score. Lenders use them to determine how likely you are to pay back a loan. Your credit score looks at the following categories: Payment History. Are your payments consistently full and on time? Amounts Owed. How much money do you owe on your accounts?Credit History Length. How old are your accounts? Credit Mix. Do you have a healthy mix of different types of accounts and debts? New Credit. Do you have a lot of hard inquiries on your credit? Do you have some brand new debts? All of these factors are looked at when determining your credit score (and therefore your motorcycle loan APR). The higher your credit score is, the better motorcycle loan APR you will be offered.IncomeLenders will also look specifically at your income to determine your motorcycle loan APR. Your income compared to the amount of debt you are in will indicate to lenders if you will be able to repay your loans.The Loan TermThe longer the loan term is, the higher the interest rate you are offered will be. Lenders will often offer lower rates for shorter terms. This means that if you select a longer lease period, you are not only paying a higher car loan interest rate, but you are paying it for a longer period of time. You will ultimately end up paying a lot more money overall by selecting a long repayment period.What makes someone a good candidate for refinance The key factors that make you a good candidate for refinance are:You credit score and historyYour incomeYour down payment (original down payment or ability to add more at time of refinance)Your desired loan termYour vehicleThe age/time left on your current loanThe steps to refinancing a motorcycleTo start, getting a preliminary quote to see how much money you could potentially save requires no commitment or hard credit check.Once you’re ready to get serious about refinancing, you’ll want to:Review your creditGather your documentsGet quotes from multiple lendersCompare offersChoose your best offer and start savingReview your credit.Make sure your credit score is looking good. It is so important to have a good credit score when you are refinancing. That is how you can make sure you save the most money. If your credit score isn’t great, wait a few months before refinancing and work on improving your score. Focusing on making on time payments and paying down debt can have a huge impact on your score.Gather your documents.Gather all of your documents, including your original loan documents. You will need a photo ID, your vehicle’s information (may include the bill of sale, VIN number, make, model, and year of your car), proof of income and financial history, proof of residence, and proof of insurance. Scan them and upload them so you are ready to go when the time comes to apply.Get quotes from multiple lendersYou should aim to apply to 3-5 lenders so that you have enough offers to compare in a short period of time, to avoid multiple inquiries on your credit. When you choose to refinance with Auto Approve, we shop around for you and save you the hassle. We have relationships with lenders across the country, which means we can find you the best deals and save you the most money. Compare your offers. You want to look at the motorcycle loan APR, the repayment period, the prepayment penalties, and the customer service ratings when making your decision. When the deals come in, the experts at Auto Approve can help walk you through your options to help you find the best loan for you. Choose your best offer and start savingOnce you decide what loan is right for you, it’s just a matter of signing on the dotted line! We can even help you with all of the paperwork (including the DMV!) That’s it! Refinancing really is so simple when you choose Auto Approve.Now You Know How To Lower Your Monthly Motorcycle PaymentRefinancing your motorcycle is the best way to lower your monthly motorcycle payments. And when you choose Auto Approve for your motorcycle refinance, you’re in good hands. Auto Approve has a 96% would-recommend rating on LendingTree as well as an A+ rating from Better Business Bureau. So don’t wait any longer – get your free quote today!

What is a loan-to-value on a car loan?If you're thinking about refinancing your vehicle, you might come across the term “LTV” or “loan-to-value”. But what does that mean?Let’s start with the short answer.What is a loan-to-value (LTV) ratio in an auto loan?The loan-to-value on a car, often abbreviated to LTV, is the percentage of your car's value that you are borrowing from a new lender, or the percentage of your car’s value that you owe on an existing loan. Here’s a simple example: If your loan is $30,000 and your car is worth $30,000, your LTV is 100%, because 30,000 is 100% of 30,000.The loan-to-value ratio, or LTV, is the monetary value of your loan divided by what’s called the “actual cash value,” or ACV, of your car, so you’ll usually see your loan-to-value listed as a percentage. The higher the percentage goes, the more risk there is for you as an individual and for your lender, so a lower LTV is generally considered better than a high one.Read on to learn more about the ins and outs of your LTV.Everything you need to know about loan-to-value (LTV) on a car loanRead on to learn:How to calculate loan-to-value (LTV)Determining your vehicle’s actual cash value (ACV)Why loan-to-value mattersHow your down payment affects your LTVWhat is considered a good loan-to-value for a car loanWhat is considered an underwater loanHow do you calculate the loan-to-value on a car?To calculate your loan-to-value ratio (LTV), divide the total dollar value of your loan by the actual cash value (ACV) of your vehicle. For example:If you owe $16,000 on a car that is valued at $20,000 by the dealer, your loan-to-value ratio is 80%.16,000 ← owed on loan÷ 20,000 ← car value__________0.80 ← loan-to-value ratioThe tricky part, however, is figuring out your car’s actual cash value in order to do that math. Many insurers use a proprietary formula when calculating a vehicle’s ACV, which makes things a little tougher for the consumer. But, the good news is, you can get a ballpark range fairly easily.What does 80% LTV mean?80% LTV means you owe 80% of the total value of your car to your lender. This is a normal LTV.What does 125% LTV mean?125% LTV means you owe 125% of the total value of your car to your lender – more than the vehicle is worth. This is an example of negative equity or an underwater loan.This can happen when:you don’t make a downpaymentyour car depreciates too fastyou buy a car you can’t affordyou get too many add-onsyou finance a new car by rolling over your old loan into the new loan, carrying a balance from the old loan onto the new oneHow to figure out your vehicle’s actual cash value (ACV)The easiest way to find out your ACV for the purposes of calculating your approximate LTV is to research your car's make and model and look for cars with similar mileage and histories. To do this, you can use the Kelly Blue Book, search for cars like yours for sale online, or even visit a local dealership and ask their thoughts.The basic formula for computing actual cash value is to subtract depreciation from replacement cost, but that is pretty complicated. Your ACV will almost certainly be less than what you paid. For the most part, a car’s value drops significantly the moment someone drives it off the lot and it goes from new to used. But after that initial drop-off, the value depreciates much slower as the vehicle gets used and experiences regular wear and tear.Why does loan-to-value matter?The loan-to-value ratio is one of the most important parts of a new car loan because the loan-to-value on your proposed loan will often determine whether or not a lender will be willing to give you the financing you need, and on what terms.Think about the example of a loan with 100% LTV. Many lenders wouldn’t move forward with this loan because the LTV is too high, making their risk too high. That’s one of the many reasons most people put down a downpayment when buying a new car: lower the LTV makes you eligible for better loan terms and more likely to receive offers from more lenders.And the same is true for refinancing a vehicle. After all, the refinance process is basically applying for a new auto loan with another lender. You’re taking out a brand new car loan for the same vehicle and paying off your existing loan with the new loan. People do this to get a more favorable interest rate or to lower how much they’re paying per month (or both). So when you think about refinancing, you’re really thinking about getting a new loan – which also means that you want a good LTV to appeal to lenders when you want to refinance.How does a down payment affect my auto loan?When you get a loan, the lender will typically request an upfront cash payment called a down payment that’s not part of the financing. The down payment is used to reduce the loan-to-value ratio for your new loan. Some lenders also ask for an additional downpayment when you refinance. Even if the lender doesn’t ask, if you have the financial flexibility, you may want to request to add or increase a downpayment in order to help you save more money and pay less (monthly and in the long run).This is all done because your LTV percent can affect both the interest rate available to you and overall lender options. In fact, some lenders have an LTV ceiling, meaning they won’t lend if the LTV is above a certain percent. Again, the higher the loan-to-value, the more risk the lender has to take on (and you, too!), so it makes sense that a better LTV would give you more and better options for your new loan. For many loans, increasing the amount of your down payment will likely decrease the total cost of borrowing money for that purchase and may save you some cash in monthly payments.What is a good loan-to-value ratio for a car?In general, you want a low LTV. When refinancing a home, you want at least 20% equity in the home, so an 80% LTV or lower. Vehicles are a little trickier, since they depreciate in value over time. While an LTV less than 80% is ideal, it’s not uncommon to have an LTV around 100% on your existing loan when it comes to car loans. When getting a new loan through refinancing, a high LTV won’t necessarily disqualify you, but depending on the lender, you may be asked to put down a down payment to lower your LTV (and we’ll get into why in just a second). All that said, the lower the LTV, the better the interest rate you’re likely to get. So a lower LTV is always better for you as the consumer.What is an underwater or upside down car loan?A loan is called “underwater” or “upside down” when the LTV is higher than 100% – that is, when you owe more than your vehicle is worth.Here are some tips to help you get out of such a situation.And that’s everything you need to know about your car’s loan-to-value.Now you know what a loan-to-value is on a car and why it matters.Understanding how loan-to-value works on an auto loan, whether you’re buying a new car or refinancing your vehicle, is an important part of understanding your eligibility for different loans and the offers available to you.If you’re looking into refinancing, the team here at Auto Approve will work with you one-on-one through every step in the process – whether that means getting prequalified online or finding an offer tailored just for you. Get started today by filling out our simple form to get a quote in minutes.GET A QUOTE

Auto refinance can be confusing when you don’t recognize the terminology. Learn key vehicle refinancing words, terms, phrases, acronyms, and definitions with this in-depth refinance dictionary and demystify the car loan refinance process.Table of ContentsAmortizationAPRCo-borrowerCollateralCo-signerCredit ReportCredit ScoreCurrent BalanceDepreciationDown PaymentFinance RateFICO Credit ScoreGAP InsuranceHard InquiryInterest RateKelley Blue Book ValueLienLoan ModificationLoan TermNon-Sufficient Funds Fee (NSF)Original Loan AmountPayoff AmountPrepayment PenaltyPrincipalProof Of EmploymentProof Of InsuranceProof Of ResidenceRefinanceSecured LoanSoft InquiryUnderwaterUnsecured LoanUpside DownUsury LawHow to use this guideFamiliarize yourself with these terms before you dive into the refinance process. This glossary is organized alphabetically so you can bookmark it and return to it when a word or phrase trips you up as you refinance your vehicle.Essential Auto Loan Refinance Terms & DefinitionsAmortizationHow your loan payments are scheduled and divided up to pay the interest and the principal. An amortization table can show you how your payments will be allocated throughout your repayment period.Annual Percentage Rate (APR)This figure, expressed as a percentage, is your interest rate plus any additional fees you are responsible for. It is important to consider a loan’s Annual Percentage Rate, or APR, as it gives a much more accurate idea of how much you will be spending on your car loan.Co-borrowerA co-borrower is a person who will share joint responsibility of the loan with you. This is different from a co-signer because a co-borrower is always considered jointly responsible for a loan, while a co-signer is only responsible for payment when the primary borrower defaults.CollateralCollateral is an asset that secures a loan. For example, if you were to stop making your car payments and default on the loan, the bank would be able to take your car as payment. The car is the collateral on a car loan.Co-signerA co-signer is a person who agrees to back a loan if the primary borrower defaults on it. They do not share joint responsibility for the loan like a co-borrower does.Credit ReportYour credit report is your personal financial history: it tracks what accounts you have open, your payment history with each account, and the balance you have on each account. These reports are created by the three major credit bureaus: TransUnion, Equifax,and Experian. You should routinely check your credit report to ensure there are no errors. Lenders will request a copy of your credit report to determine if you are a good candidate for a loan.Credit ScoreA credit score is a three digit number that is calculated based on a person’s financial history to indicate your creditworthiness. The numbers range from 300 to 850, and the higher your score is the more creditworthy you are considered. Your credit score is one of the biggest determiners of the car loan interest rate you are offered (the biggest factor that you can control at least).Current BalanceThe amount that you currently owe on your vehicle loan.You can typically find this amount listed on your monthly statement.DepreciationThe loss of value that occurs as an asset ages and wears. Vehicles typically depreciate from the moment they leave the new car lot, with rare exceptions for vintage cars and unusual market conditions.Down PaymentThe down payment is the cash paid up front for a vehicle (or any purchase) when procuring a loan. This amount is not financed. You should aim to put down at least 20% of the car’s total cost. This will help you to stay ahead of the depreciation that occurs.Finance RateFinance rate is another term for APR.Your loan’s finance rate is your interest rate plus any additional fees you are responsible for. FICO Credit ScoreA person’s credit score as calculated by Fair Isaac Corporation (FICO). There are other data analytics companies that will calculate a credit score, but FICO is the most popular and widely used.GAP InsuranceGAP stands for Guaranteed Asset Protection. This is optional coverage that covers the difference between your vehicle’s value (which is what insurance will pay) and the amount that you owe on your car in the event of an accident. Let’s say your car is totalled and your insurance pays you the value of your car, which is $15,000. But you still owe $17,000 on your loan. GAP insurance will cover this difference so you are not paying out of pocket.Hard InquiryA formal request of your credit history from a lender. When a lender considers approving a loan for you, they will request a copy of your credit report to review. This request will actually show up on your credit report and will cause a temporary ding on your credit score. Hard inquiries cannot be made without your permission.Interest RateThe interest rate is the cost of borrowing money, expressed as a percentage of the amount borrowed. The interest rate you are offered will be based on the market rates, your credit score and financial history, your income, and other factors.Kelley Blue Book ValueThe value of a vehicle according to American vehicle valuation and automotive research company Kelley Blue Book.Kelley Blue Book is viewed as a reputable and reliable place to check your car’s value. The value will be based not only on the make, model, and year of your car, but also on the mileage and condition of the car. It’s a good idea to keep an eye on the value of your car throughout the loan period to ensure that depreciation is not outpacing your loan payments (see “Underwater” and “Upside Down”).LienA lien is a lender or creditor’s legal claim to an asset if you fail to repay a debt.When you get a car loan, the lender has a lien on your car, so if you do not pay your debt to them, the car will belong to them.Loan ModificationA change to your loan, as reported to the credit bureaus by your lender.If you refinance your loan with the same lender, they may report it to credit bureaus as a loan modification rather than a new loan. This will not affect your credit score as a new loan would.Loan TermThe loan term is the amount of time you have to pay back your car loan and typically ranges from 24 to 84 months. The loan term is also known as the repayment period. Changing your loan term can lower your monthly payments or the amount you pay in interest.Non-Sufficient Funds Fee (NSF)If one of your payments does not clear or there are not enough funds in your account to cover a payment, you may be charged a Non-Sufficient Funds, or NSF, fee. This type of fee may be charged by your lender, your bank or credit union, or both. On the lender side, the amount should be listed in your contract.Original Loan AmountThe original loan amount is the amount of money originally borrowed from a lender to pay for a vehicle. It is typically the cost of the car plus taxes and fees, minus the down payment made.Payoff AmountThe payoff amount is the amount you will need to pay to get rid of your loan entirely. This is separate from your current balance, which may not reflect the interest and fees that you would be responsible for if you want to pay off your loan entirely/early.Prepayment PenaltyA fee for paying off your car loan early. These penalties may be listed in your original car loan contract. These penalties are designed to offset the losses in profit that occur when you pay off your loan early. Prepayment penalties will at times offset any savings that refinancing can provide, so it’s important to know what these penalties are before you commit to refinancing your car loan.PrincipalPrincipal is another name for the original loan amount. It is the amount of money initially borrowed to purchase a vehicle. When you make your monthly payments, your money is first applied to taxes and fees, then applied to interest that is due, and the remainder goes to paying down your principal.Proof Of EmploymentA statement or document that shows you are employed. This proof may be a paystub, a letter from your employer, or a W2. This shows the lender that you have means to repay your loan.Proof Of InsuranceA statement or document that demonstrates you have coverage and the amount of that coverage. To show that you have insurance coverage, the lender will usually require a copy of your insurance policy that states the amount of coverage. Proof Of ResidenceA statement or document that confirms your place of residence.You will need to show where you actually live as part of the refinancing process. This cannot be a PO box. Lenders want to know where the car will physically be parked in case they need to seize it should you default on your loan.RefinanceA refinance is when you pay off your current loan with a new loan. Your new loan will ideally have a better interest rate and/or better terms. Refinancing your car allows you to add a cosigner or co borrower, change your interest rate, and change your repayment period.Secured LoanA loan that is backed by collateral, such as a car loan. If a person defaults on their loan, the collateral is taken as payment. In the case of a car loan, the car is the collateral.Soft InquiryA soft inquiry is a kind of credit check that allows lenders to review your credit score and part of your credit report without it counting as a hard inquiry. Also known as a soft pull, this is common when getting preapproved for a loan. Soft inquiries do not affect your credit score and your approval is not required for a soft inquiry.UnderwaterA vehicle loan is considered “underwater” when the amount owed on the loan is greater than the worth of the vehicle. For example, if the market value of your car is $15,000 but you owe $17,000 on your car, it is considered underwater. This happens when depreciation outpaces payments. It is common for this to happen if you do not make a down payment (or make too small of a down payment). Unsecured LoanA loan that is not backed by an asset for collateral. These loans tend to have higher interest rates because they are higher risk for the lender.Upside DownUpside down is the same as being underwater, in loan terminology. It is when you owe more on your car than your car is worth.Usury LawThe law that defines the maximum amount of interest a company can charge in your state. Learn These Terms To Make Refinancing Your Car Loan Less ConfusingAnd here’s one more helpful name to remember: Auto Approve.At Auto Approve, we take the mystery out of refinancing, helping you find the refinance that’s right for you and handling the paperwork – even the DMV! Find out just how much money you could save by sharing a few simple details, no commitment required.GET A QUOTE IN 60 SECONDS

How do interest rates work on car loans?Here’s the short version of everything you need to know:A car loan is when you borrow money from a bank or other lender to pay for the cost of a car. You then pay that lender back over time based on terms set at the time you get the loan.Interest is the cost of borrowing money from a lender. It’s what you pay to the lender on top of the cost of the car. There are different kinds of interest: simple, accrued, and compound. Most car loans use simple interest.The interest rate on a car loan is the formula used to determine how much you’ll pay your lender above the amount of money paid for the car. Your interest rate will be determined by factors like: your credit score and finances, your vehicle and loan-to-value, and broader market trends.Want to learn more? Keep reading for more in-depth explanations. The Complete Guide to Car Loan Interest Rates In this guide, we’ll cover:Car loan basicsInterest rate basicsInterest rates vs. APRHow car loan interest rates workFactors that affect the interest rate you’re offeredCar Loan BasicsWho needs a car loan?If you’re planning to buy a car, there’s a good chance you’ll need to finance at least part of the purchase. Most people do not buy a car in cash.Financing allows you to borrow some (or all) of the money for a large purchase and pay it back to the lender over a set period of time. Lenders will charge you interest, which is essentially the fee you pay for borrowing money. How do car loans work?Car loans are very simple in principle. When you want a car that you cannot afford to pay for in cash, a bank loans you the money to purchase the car. You get to take the car home and drive it as if it’s your own, but it is technically an asset of the bank. When you finish paying back the money that you owe your lender, plus interest, the bank signs the title over to you and you officially own the car.What is the difference between a car loan and a car refinance?They’re very similar:A car loan is the loan you get when you first purchase a vehicle. A car refinance is when you already have a car loan and decide to get a new loan that replaces the old one. Some people choose to refinance because it is a way to change the terms of a car loan, which are otherwise locked in for the duration of the loan.Considering a car refinance? Learn more about refinancing here.Interest Rate BasicsWhat is interest?Interest is the cost of borrowing money from a lender. There are three different types of interest rates which are all calculated in different ways:Simple interestAccrued interestComplex interestSimple interestSimple interest (also known as regular interest) is based on the outstanding principal and is paid as you go. For example: You borrow $1,000 with a 5% annual interest rate for three years.$1,000 x 0.05 x 3 = $150With simple interest, you would pay $50 per year ($150 total) in interest.Accrued interestAccrued interest accumulates and is unpaid until the end of the payment period.For example: You borrow $1,000 with a three year loan term and a 5% annual interest rate accrued every 30 days.$1,000 x 0.05 x (30 / 365) You would still owe $150 total, $50 per year, but it’d be paid as $4.11 every 30 days. Essentially, this is an accounting difference where you accrue 13.7 cents of interest per day and pay when you get to 30 days of interest accrued.Compound interestCompound interest is paid on the total of the principal and accrued interest. For example: You borrow $1,000 with a three year loan term and a 5% interest rate, compounding annually. That means that you pay interest on the interest, essentially.It’s calculated like this:Principal x ((1 + %interest)years of loan - 1) = total interest due over time$1,000 x ((1 + 0.05)3 - 1)$1,000 x (1.157625 - 1) = $157.27APR vs. Interest RateWhen it comes to car financing, the terms “APR” and “interest rate” are often used interchangeably. But this is not correct and they are not actually the same. The interest rate is the cost of borrowing the money, while the APR (or Annual Percentage Rate) is the interest rate plus any additional loan fees for which you are responsible. These fees, also referred to as “prepaid finance charges,” can vary widely from lender to lender. They typically cover costs associated with underwriting their loans and doing the necessary paperwork. It’s important to review the APR offered to you when looking at a loan, as it’ll give you a better picture of what you’ll actually be paying.How Do Car Loan Interest Rates Work?Car loan interest rates are almost always simple interest rates. A borrower is offered one fixed rate for the duration of their car loan. As the borrower pays down the principal, the amount of interest that they pay decreases until they have paid the loan back entirely. In some cases lenders may use precomputed interest. This means that at the start of your loan they determine how much you will pay in interest and your payments will be divided evenly. If you pay off your loan early, you will still be required to pay the predetermined interest, so you will be unable to save money as you would with a simple interest rate.What Factors Affect The Interest Rate You Will Be Offered?The car loan interest rate that is offered will be based on a number of different factors, including the market rates and the credit worthiness of the applicant. Here are some of the factors that affect the interest rate offered:Your credit scoreYour debt-to-income ratioMarket factorsYour vehicleYour down paymentThe loan termYour Credit ScoreYour credit score is the biggest factor that is within your control when it comes to what interest rate you will be offered. Your credit score is an indicator of how likely you are to make on-time, full payments every month. The better your score is, the better candidate you are for a car loan. The best interest rates will be offered to applicants with strong credit scores.Your Debt-To-Income RatioYour debt-to-income ratio is another huge indicator of how likely you are to repay your loan. If you have a lot of debt compared to how much money you make, you are considered less likely to repay your loan. The Market ConditionsThe credit score you are offered will also be based in part on the prevailing rates at the time. If interest rates are high in general you can expect to be offered a higher rate than at other times.The Vehicle You Are BuyingThe vehicle you are buying will also impact the interest rate you are offered. The most important factor is the age of the car. The older the car is, the higher the interest rate will be.Your Down PaymentThe size of your down payment will also have a large impact on your interest rate. The larger your down payment is, the less likely your loan is to become underwater (meaning you owe more money to your lender than the car is worth). Your loan-to-value makes a big difference for both securing a loan and refinancing.The Loan TermA longer loan term will generally mean a higher interest rate. It will also mean that you will pay more interest over the life of the loan because you will be paying interest for a longer time. Your monthly payments will be lower because they will be stretched out over a longer period of time, but you will (quite literally) pay for this in the long run.How Can I Get The Best Car Loan Interest Rate?To get the best car loan interest rate possible, prepare by doing the following:Work on improving your credit score.Request a copy of your credit report and review for any errors. Pay down debts where you can, focusing especially on loans with high credit utilization ratios.Save additional money so that you can make a more sizable down payment.Get preapproved before heading to the dealership.Apply with several lenders (3-5) so that you can compare the offers.Avoid selecting a long repayment period if you can. Be sure that the car you are purchasing will fit into your budget.Securing a low car loan interest rate will mean big savings in the long run, so it’s important to do your research and prepare as much as possible when buying a car. That’s How Interest Rates Work For Car LoansIf you are planning to buy a new car it is important to understand how car loan interest rates work and how you can get the best rate possible. If you already have a car loan and are unhappy with your current interest rate, get started with Auto Approve today to find out how much car loan refinancing can save you!Get a quote now.

If you’ve looked into your car loan refinancing options, you’ve probably heard about Auto Approve and wondered, is Auto Approve a legit company? The short answer is: Yes! Auto Approve is legit. As of 2025, Auto Approve has: An A+ from the Better Business BureauA 4.7 on TrustPilotA 4.5 on Consumer AffairsPositive reviews from NerdWallet and LendingTreeAuto Approve works with credible lending partners to offer competitive refinance rates with no mark-ups. Auto Approve does not sell, rent, or lease its customer lists to third parties. (For more details, please refer to our FAQ page and privacy policy!)But you probably have more questions, like, is Auto Approve a direct lender? And how does the process actually work? In this guide, you’ll learn all about Auto Approve, how the refinance process works, and how Auto Approve works to get you the best deal possible on your car loan refinance.Everything You Need To Know About Auto ApproveWhat does Auto Approve do?Auto Approve works with a group of top lending partners to find you the best refinance offer to fit your needs. Auto Approve is not a direct lender. When you refinance with Auto Approve, Auto Approve will gather offers for you from our network of lending partners, then an Auto Approve representative will work with you directly to find the right refinance for your unique financial situation. Auto Approve advocates for you as you navigate through the world of refinance, then handles the paperwork for you when you choose the refinance that’s right for you.  What products does Auto Approve offer?Vehicle refinancingAuto lease purchaseGAP insuranceVehicle protection plansRead on to learn more.Vehicle RefinancingRefinancing means paying off your existing vehicle loan with a new one, ideally with more favorable terms. People choose to refinance to:Save money by lowering their interest ratePay less each monthAdd or drop a co-borrowerOtherwise change the terms of their auto loanCar loan refinance is Auto Approve’s primary offering. If you are looking to refinance your loan, Auto Approve can help you to:Determine if the time is right to refinance your loanConnect you with the best lenders for your refinanceHelp you applyFinalize the paperwork (including DMV paperwork)We can help you refinance your car, truck, SUV, and even your motorcycle.Auto Lease PurchaseIf you have a leased car that you want to own, a lease buyout loan is a way to purchase your leased car. You can typically buy your leased car for the price of the residual value of the vehicle, plus any taxes and fees. Unless you have that money in cash, you will need to get an auto lease buyout loan to make the purchase. GAP InsuranceGAP insurance is optional insurance that kicks in when there is a gap between what insurance covers and what you owe on your car.For example, let’s say you still owe $10,000 on your car when you get into an accident. Your car insurance decides that they will only pay out $8,000 in damages. This means that you are still responsible for $2,000 to the lender. GAP insurance would cover this so that you do not have to pay this amount. Vehicle Protection PlansA vehicle protection plan offers additional coverage on your car for maintenance and repairs. Vehicle protection plans can be used with your manufacturer’s limited warranty or they can be used when the limited warranty expires. When you refinance with Auto Approve, you can also bundle a vehicle protection plan into your low monthly payments. Bundling a plan will give you additional protection should something go wrong with your car.Vehicle protection plans from Auto Approve come with added benefits, such as:24/7 roadside assistanceUp to $50 per day rental reimbursementCourtesy towingYour choice of certified-ASE mechanic Is Auto Approve legit?Auto Approve is a legitimate company. Auto Approve was on the Inc. 5000 list of fastest growing private companies in America in 2022, 2023, and 2024.Auto Approve has an A+ rating with the Better Business Bureau, a 96% would-recommend rating on LendingTree, and a 4.7 out of 5 star rating on TrustPilot, where you can read over 12,000 real customer reviews. Auto Approve customers know that we can find them the best deals on car loan refinance and love our customer service. We know that sometimes you need to talk to a real person to get real results, so our live agents are here to work with you and give you the personalized attention you need and deserve.How does a vehicle refinance work with Auto Approve?Here are the steps to refinancing:Determine whether now is a good time for you to refinanceShare basic details with Auto Approve to get a starting estimate and confirm eligibility (soft credit check only)Gather necessary documentsApply through Auto Approve to get offers from our lenders (hard credit check required)Work with your advisor to determine the best refinance for youFinalize the refinance (Auto Approve handles the paperwork!)Step 1. Determine if the time is right to refinance your car loan.The first step to refinancing your car is determining if you should refinance in the first place. It might be a good time to refinance your car loan if any of the following apply to you:Your credit score has improved since you initially financed your car.The market rates have decreased since you initially financed your car.You want to add or remove a cosigner.You need some extra breathing room every month and want to lengthen your repayment plan. Step 2. Contact Auto Approve.If now seems like a good time to refinance your car loan, the next step is to fill out some basics about your vehicle and current loan to get a quote from Auto Approve. From there, our team can help you determine if you will qualify for loan refinancing, and can even get you some preliminary offers in minutes.At this stage, only a soft credit check is required to confirm whether you’ll be eligible to refinance, but a hard credit check will be required to get confirmed offers later in the process. Step 3. Gather your documents.After you chat with an Auto Approve expert, they will help you determine where you should apply. You will need to gather the necessary documents, which will include:Current loan information. You will need the name of your current lender, your account number, and your payoff amount. It’s good to have the contract handy to compare specific terms as well. Personal information. You will need identification, proof of employment, proof of residence, and your contact information.Vehicle information. You will need your car’s VIN, make, model, year, and mileage. Step 4. Apply.Once you have all of your information collected, Auto Approve will help you apply to the lenders that will best suit your needs.  Step 5. Compare and sign.When the offers roll in, you will need to decide which loan is right for you (Auto Approve can help you with this too!). Once you decide which loan is right for you, you can simply sign on the dotted line. Auto Approve will make sure that your old loan is paid off and that your new loan is ready to go. It’s that simple! Auto Approve will even handle the DMV paperwork for you. Auto Approve is legit – and a great partner for your vehicle refinance!Now you know all about Auto Approve and how Auto Approve helps customers find the best refinance for their needs.If you think you’re ready to refinance your vehicle, Auto Approve can help connect you with the lender that’s right for you.GET A QUOTE IN 60 SECONDS

If you are applying for a new car loan, you’re probably wondering what lenders will take into consideration. What do the big banks look for, and how can you be sure that you will be approved for a new car loan? Here’s the short answer.When you apply for a car loan – whether a new loan on a new vehicle or a refinance on an existing loan – the key things lenders will look at are: your current income and income history, your credit score and credit history, your personal information, the vehicle you’re hoping to finance, and either your down payment or your existing loan.Read on to get into the details of how banks determine car loan eligibility (and how you can make sure you qualify).Car Loan Eligibility: Everything you Need to KnowIn this guide, we'll review:How banks determine if you qualify for a car loanWhat’s considered a good credit score for a car loanQualifying for a car refinanceHow do banks determine if you qualify for a car loan?Your incomeYour credit scoreYour personal detailsYour down paymentLenders will look at a lot of information when determining whether or not you are eligible for a new car loan. Your current finances, your credit score, and other factors are all considered when determining eligibility.Your current incomeLenders want to see that you have steady income. Lenders will want to see current pay stubs if you are a W-2 employee (usually they will want to see more than one). If you are self employed or receive social security, you may need to provide bank statements. The lender will tell you what documents you will need to provide. They will also look at how your income compares to your debt (your debt-to-income ratio).Your credit scoreWhen you apply for a car loan lenders will pay special attention to your credit score. Your credit score is an indication of how likely you are to repay your loan, so the higher your score is, they will view you as more likely to repay your car loan. A good credit score will also help you to secure the best car loan APR possible.Your Personal Details: identity and residenceLenders will need to verify that you are who you say you are. They also need to know where you live so that they can repossess the car should you fail to make payments. A government issued ID is usually required for this. If you do not have one, a utility bill or lease agreement may suffice.Your down paymentAre you wondering “how does increasing the size of your down payment impact your auto loan?” The answer is, a lot. Lenders feel more comfortable giving you a car loan if you make a down payment. It will also mean that you have to borrow less money and will in turn get a more favorable car loan APR.What Is A Good credit score for a Car loan?A good credit score means you are a more trustworthy loan candidate in the eyes of the lender. Credit scores can be broken down into five categories: Exceptional (Super prime): 781 to 850Very Good (Prime): 661 to 780Good (Non prime): 601 to 660Fair (Subprime): 501 to 600Poor (Deep subprime): 300 to 500 There is no hard and fast rule for what credit score you need to have to secure a car loan, but generally you will have an easier time getting a car loan if your credit score is above a 620. But don’t just take our word for it. Experian data from the first quarter of 2025 provides data on the car loan APRs offered by credit score (for new cars).Super prime (781-850) average APR offered: 5.18%Prime (661-780) average APR offered: 6.70%Near prime (601-660) average APR offered: 9.83%Subprime (501-600) average APR offered: 13.22%Deep subprime (300-500) average APR offered: 15.81% Additionally it found that 65% of borrowers had a credit score above 661, while only 2% of borrowers had a credit score below 500. So while it is clearly not impossible to finance a car with a poor credit score, it is significantly more difficult and borrowers are offered much higher car loan APRs.How do banks determine if you qualify for a car Refinance?Your existing loanYour vehicleYour financesIf you are looking to refinance your current car loan, you may be wondering what requirements to refinance a car there are. The refinance requirements are similar to those of simply applying for a new car loan, but your current loan and vehicle must also be taken into consideration.Your Current Car loanWhen it comes to car refinancing, lenders want to see that your current loan is at least six months old (although experts recommend waiting a year to refinance to give your credit score time to settle again after your initial financing). This will show that you can make your payments for this loan on time and in full. Some lenders might not require this, but you will need to at least wait until the car’s title is in the possession of your current lender. This can take weeks or even months for the paperwork to get straightened out. Lenders will also consider the time remaining and the balance remaining on your loan. Lenders usually have requirements for how much time is left on your loan (two years is pretty standard). Lenders also typically have requirements for how much of a balance remains on your car loan ($5,000 is another typical amount). If you do not have a lot of money or time remaining on your car loan you may have a difficult time qualifying for a car loan refinance.Your vehicleLenders will also consider the car you are refinancing. If your car is too old or has too many miles on it (more than ten years old and/or more than 100,000 miles) lenders may not approve you for refinancing. Some lenders will refuse to refinance certain makes and models, such as large engine or commercial vehicles. Your vehicle’s history will also be taken into account by lenders. If your car has been in a significant accident or had water damage this might be an issue for refinance.The loan to value on your current vehicle is another piece that lenders will consider when it comes to refinance. Your LTV is the total amount of your loan divided by your vehicle’s actual cash value. If this number is more than 125%, you may have a hard time getting approved for a car loan refinance. Other considerationsIf you want to refinance your vehicle, lenders will consider many of the same factors as they did when you got your initial financing:Your current income and debt-to-income ratioYour credit scoreYour identity and residenceThe down payment you made to purchase the vehicleWhen applying for car loan refinance you should prepare yourself as much as possible by ensuring your credit score is in tip top shape.That’s how banks determine car loan eligibility for both new cars and Car refinancingLenders look at a lot of information when determining whether or not you will qualify for a car loan. It’s a good idea to gather as much information as you can ahead of time and work on your credit score to give yourself the best chance possible of getting approved.If you are considering car loan refinance, Auto Approve is here to help! Our experts can guide you through the process and help find the lender that is right for you.So what are you waiting for? Get your free quote today!GET A QUOTE IN 60 SECONDS

You’ve done your research and you’ve decided that it’s definitely time for you to refinance your vehicle, and you want to make sure you get the best rates on your car refinance. What do you do?Here’s the short answer.To get the best car refinance rates, you’ll need to:Understand APR vs. interest ratesKnow the information lenders will want to look at and prepare your finances accordinglyMake sure your credit is in orderMaintain a good payment recordCompare refinance offers from multiple lendersRead on for the long answer.Everything you need to know to get a good rate on your car refinanceLike so much with refinancing, the more you know the better off you will be. Some diligent research and proactive measures can help you secure the best refinance rates around.In this guide, we’ll cover:Why people choose to refinanceThe difference between interest rates and APRWhat lenders look at when determining ratesProactive steps you can take to get the best car refinance rate possibleReasons to refinance your carThe number one reason to refinance a vehicle is that, thanks to dealership markups, most people can save money by refinancing. However, there are many more specific reasons people choose to refinance.Consider refinancing if:Your credit has gone upMarket rates have gone downYour expenses have gone up and your current rate no longer works for your budgetYou want to shorten or extend the loan term to pay it off on a specific timelineYou want to add or remove a co-borrowerAPR Vs Interest RatesIf you’ve been looking around at car refinancing, you have probably come across the terms APR and interest rate. But what is the difference between APR and interest rate?Interest rate is the cost you pay each year to borrow money, expressed as a percentage. APR, which stands for Annual Percentage Rate, is the interest rate plus any other fees associated with the loan. This includes any loan fees or interest that accumulates before your first payment.Your APR is actually a much better gauge of what a loan will cost, as opposed to an interest rate. All lenders are required by the federal Truth in Lending Act (TILA) to disclose what the APR on a loan or line of credit will be. APR is the number that you want to compare when looking for the best refinancing rates.What Lenders Look At When Determining RatesInterest rates, which combined with additional fees make up the APRs, are determined by both market factors and personal finance factors. Market FactorsRefinance rates depend in part on how the economy is performing. Interest rates are set by the Federal Open Market Committee (FOMC). Lowering interest rates is intended to encourage spending if they decide that spending needs to be encouraged. Personal Finance Factors And The Four C’s Of CreditWhen you apply for credit, lenders will look at what is called the four c’s of credit. These are the considerations they will take when deciding to approve or reject your loan. They will also help dictate what your APR should be. The four c’s of credit are: capacity, character, collateral, and capital. Let’s explore these terms.Capacity. This refers to your ability to repay the loan. What is your income? Is it a steady job that you have had for a while? What are your other debts? These all contribute to your capacity to repay the loanCollateral. This refers to what you have that could repay the loan. In the case of a secured auto loan, your car would serve as collateral.Capital. This refers to how much you are worth (monetarily speaking, don’t take this to heart too much). What are your other assets? Do you have a mortgage, a savings account, or another car? All of this gives a snapshot to lenders and proves that you can manage your finances and have funds, in addition to your income, to pay you debt.Credit. This refers specifically to your credit score and history. We will look at how your credit score is determined in the next section. Your Credit Score And HistoryYour credit score is the most important factor in your refinance rate. While there is no magic credit score to refinance, the higher your score is, the better rate you will secure. To ensure you can secure the best rate possible, look at the following factors:Payment History. Do you have a history of on time payments? Have you missed payments in the past? Lenders want to be sure you will pay back your debt on time. Amounts Owed. How much money do you owe? The amount of money you owe, your debts, are used to calculate your credit utilization score. A credit utilization score below 30% is considered desirable for lenders. Credit History Length. How old are your accounts? Having older accounts and a longer credit history is more favorable to lenders. Credit Mix. Do you have a mix of different types of accounts and debts? A good mix might include a mortgage, auto loan, student loan, and credit cards. This indicates to lenders that you can manage your money across multiple accounts. New Credit. Do you have a lot of hard inquiries on your credit? Do you have some brand new debts? These might be considered liabilities by lenders.Steps You Can Take To Secure The Best Refinancing RatesThe most important things you can do to secure a good auto refinance rate are:Get and maintain good creditShop around and compare for the best ratesBuild And Monitor Your CreditWhether you already have great credit or need to build credit, here are some proactive steps you can take to ensure you have great credit to secure the best available refinance rate:Get your credit report and review for errorsKeep your credit balances below 30%Request higher credit limitsKeep using consumer creditMake your payments on timeBecome an authorized user on another person’s accountUse a secured cardWorth noting: Refinancing can temporarily lower your credit, so if you need a high credit score for another major purchase, you may want to time your refinance accordingly.Get Your Credit Report And Review For ErrorsContact one, or all three, of the credit bureaus (Equifax, Experian, and TransUnion) and get your free credit report. You can get your report from each agency for free once per year. Review your report thoroughly and look at the following:The date you opened any credit accounts or took out any loans. Make sure all dates are accurate.The current balance on each account. Have your records handy to cross reference.Your payment history. Be sure that you have not been reported inaccurately for a late or missed payment.The credit limits and total loan amounts.Any bankruptcies or tax liens.Your identifying information. This includes your name, address, and Social Security number. If you notice any inconsistencies with your report, you can contest the information and report it. Bureaus have 30 days to respond, so it may take some time to get a correct and accurate report. It is important to follow through however as the impact can be drastic.Keep Your Credit Balances Below 30%This is a simple way to lower your credit utilization ratio, which makes up 30% of your credit score. The highest credit scores often use less than 7% of their available credit. This will quickly improve your credit score and as soon as it is reported for the month, you will see the increase on your credit score.Request Higher Credit LimitsContact your credit cards and see if you are eligible for higher limits. This will also help lower your credit utilization ratio, ultimately increasing your credit score. This will help your score very quickly, as soon as it is reported to the credit agencies.Keep Using Consumer CreditWhen trying to increase your credit score, it may be tempting to stop using credit cards altogether to avoid accumulating more debt. It is better for your score to keep using your credit cards to make small purchases that you can pay off. If you can consistently pay off your monthly balances, it will improve your credit and make you a more desirable loan candidate.Make Your Payments On TimeKeep making on time payments to keep your credit score in good standing. Missed payments can quickly ding your score.Become An Authorized User On Another Person’s AccountThis is a quick and easy way to increase your credit score, especially if you do not have a long credit history. If a relative or good friend has an account that is in good standing and has a high credit limit, adding yourself as an authorized user will increase your credit. You don’t even need to use their credit card, you simply benefit from their good credit.Use A Secured CardA secured card is a type of credit card that is backed by cash deposits. This is especially helpful for people who do not have a long credit history but need to establish one. It is used like a normal credit card, and if you consistently make on time payments it will improve your credit score.Shop Around And CompareThe best refinance loans will have competitive APRs and low minimum loan amounts. Looking for a lender with a history of high customer satisfaction rating that is transparent and reliable is also important. You need to make sure you shop around before choosing a refinancing lender to ensure you get the best refinancing rate available to you. Auto Approve can help by helping you gather quotes from a wide range of trusted lenders.Now you know how to get the best available auto refinance ratesOnce you have a healthy credit score, Auto Approve can help you with the next steps of shopping around, applying, and comparing the rates and terms. WHen you refinance with Auto Approve, you get personalized help finding the best fit for your needs, then we do the paperwork for you! And don’t worry, we never tack on additional fees to your rates. Get your free, no-commitment quote today to see how much you could save by refinancing your vehicle!GET A QUOTE IN 60 SECONDS

The short answer: Yes, you can add or remove a cosigner from your vehicle loan by refinancing.Refinancing a car loan is when you replace one car loan with another loan. It is the best and often only way to change the terms of your loan.If your situation has changed and you need a little help with monthly payments, or if you could benefit from your spouse’s excellent credit, for example, refinancing with a cosigner might be a good idea. And on the other hand, if circumstances have changed and you are looking to remove someone from your loan, refinancing your vehicle is a relatively easy way to remove them from the loan – and it has other benefits, if the timing is right for you to get a better deal.Read on to learn more.The long answer: In this guide, we’ll cover everything you need to know about cosigners and refinancing:What is a cosigner?Keeping or adding a cosignerRemoving a cosignerWhat Is A Cosigner?A cosigner is a secondary person who signs onto a loan. They are obligated to pay back the loan should the primary borrower have difficulties making on-time payments. They assume the same financial risk as the borrower. Having a cosigner with good credit can be beneficial in securing a lower APR and getting better auto loan deals.How To Keep Or Add A CosignerYou can easily keep or add a cosigner when you refinance. Your cosigner will simply have to meet the lender’s requirements. Here are the most common requirements to be added as a cosigner:A good (or excellent) credit scoreA good payment historyA qualifying incomeDesire to cosign on your loanA clean background checkRead on to break each of these factors down.A Good (Or Excellent) Credit ScoreGreat credit is the first requirement of cosigning a loan. Think of your cosigner as a safety net; should something happen to you financially, the lender is assured that there is a backup plan for payments being made on-time. A good credit score is an indication of how strong of a security net you have.Credit scores are based on payment history, amounts owed (known as credit utilization), credit history length, credit mix, and new credit. A cosigner is only beneficial if they have good credit. A score of 670 and above is considered good, but the higher their credit score is the more helpful it will be to you.A Good Payment HistoryDoes your cosigner have a good history of on-time payments? Payment histories show lenders how people handle their debts. If you have a history of consistent payments, you are less of a risk to lenders. A Qualifying IncomeDoes your cosigner have a steady income? Their income needs to show that they can pay back the loan on your behalf if you are unable. Desire To CosignDo they want to help you out in this way? Becoming a cosigner comes with a lot of liability. Once they sign on the dotted line, they are responsible for the debt if you should default. A Clean Background CheckLenders will often use background checks to determine the liability of a cosigner. They will specifically look for financial issues, including evictions, repossessions, and financial fraud.How To Remove A CosignerThere are three ways to remove a cosigner from your loan, but refinancing is certainly the most popular:Attempt to remove them without changing your current loanPay off the loanRefinance to remove themYou may want to remove a cosigner if, for example, your credit has improved significantly since your original loan, and you no longer need the help of another person. You may want to reduce the risk for a loved one who was helping you out in a time of need, or you may want to change a loan to reflect a changing relationship. Whatever the reason, when you are ready to remove someone as a cosigner, you have the above options.Let’s take a closer look.Try To Remove Them From Your Existing PolicyRead your contract carefully and closely and see if there are any provisions that will allow the cosigner to be released from responsibility. This is very unlikely, as cosigning is put in place specifically to make it difficult for one person to back out. However, it is worthwhile to look through your contract if you are thinking about it.Pay Off The LoanIf you pay off the loan entirely, you will remove the cosigner automatically. This may not be a practical solution, however, if you are not in the position to do so. Refinance And Remove The CosignerThis is the most popular and easiest way to remove a cosigner. Since refinancing is replacing one loan with another, you are essentially paying off the original loan and starting with a fresh loan with new terms. Before you decide to do this, check on the following:Your Credit Score. Is your score in good or excellent standing? If it is not in good standing, expect to pay higher interest rates if you drop your cosigner.Your Cash Flow. Are you able to make the monthly payments every month? Do not remove your cosigner if things will be very tight. Falling behind on payments will be detrimental to your credit and can result in you losing your car.Your Current Loan. Are there prepayment penalties if you pay off your loan?  If the penalties are high, it may negate any savings from refinancing. Is there enough time remaining on your loan to make refinancing worth it? If you are near the end of your loan term, it is likely not worthwhile to refinance.Your Car’s Condition. Is your car retaining value and eligible to be refinanced? If you owe more on your car than it is worth, you will most likely not be eligible to refinance.Now You Know: Adding, Keeping, Or Removing A Cosigner From An Auto LoanIf you’re looking to add or remove a co-borrower, refinancing your vehicle may be your best or only option. At Auto Approve, we can help you compare quotes from multiple lenders and refinance today.GET A QUOTE IN 60 SECONDS

Wondering, “When should I refinance my car loan?”The short answer is, it depends! It depends on: your eligibility for a refinance, whether you’re a good candidate for a beneficial refinance, and other factors related to your personal finance and broad financial trends.Here are three key things to think about:Can you refinance your loan?Is the time right for you?What do you want to achieve through refinancing?Car refinance eligibility timelineBorrowers are generally able to refinance an auto loan from a few months after the start of the loan until the last 1-2 years of the loan, depending on a variety of factors, but refinancing very early or very late in the loan is less likely to save you money. Refinancing when it’s right for youYou may also want to time your refinance based on your credit score, your finances, broader interest rates trends, or other changes you might want to make to the loan (like adding or dropping a co-borrower).The choice to refinance a car loanThe refinancing process can lower your monthly payments and help you get out of debt faster. But should you refinance your vehicle right now? If you're thinking about it, here are some things to consider:Is your auto loan term nearing its end?Are you struggling with high monthly payments?Have interest rates gone down?Has your credit score gone up?Do you want a lower interest rate?Do you want to add or drop a co-borrower?Ultimately, the right time to refinance a car loan depends primarily on your vehicle, your current loan, your finances, and your credit score, but there are many factors to consider.Dive deeper in the next section to decide if now might be the right time for you to refinance a car loan.Here’s How to Know When to Refinance Your VehicleConsider these five key factors to decide when you should refinance your car loan:Your existing loanYour credit scoreYour cash flowYour eligibilityInterest ratesLet’s break these factors down.Your Existing LoanWhere and when you got your existing loan – and the details of that loan – are all among the deciding factors in whether you’ll be able to find a better deal.It’s worth noting that, if you got your loan through dealership financing, the odds are very good you could save money by refinancing, as dealerships often add mark ups to their rates.When thinking about whether or not to refinance your car loan, it is important to know the current interest rate and term of your loan. You should consider the amount of time left on your loan and any prepayment penalties.Prepayment penaltiesPrepayment penalties are fees your lender charges you for paying off the loan before it is due. Beware: some lenders will not refinance loans that have prepayment penalties attached. That said, even if your current loan has a penalty attached, it may still be worth it for you to refinance. In some cases, you may be able to save more by refinancing than the cost of the penalty. This is especially true if you got a particularly bad rate on your existing loan (which frequently happens when you buy a new car directly from the dealer). Time remainingIf you have had your loan for several months and/or have several years left on your current auto loan, refinancing may be the right decision. After all, refinancing your car loan can be a great way to save money on interest and get lower monthly payments!If you refinance your loan to a longer term, you’ll likely be able to lower your monthly payments – but you could end up paying more in interest. On the flip side, if you can refinance at a lower interest rate and at a similar or even shorter loan term, you’ll be able to save money in the long run. (That’s one of the things that makes refinancing so great!)Your Credit ScoreYour credit history is one of the biggest factors in being able to refinance with most lenders. If you have good enough credit, refinancing your car could save you hundreds or even thousands of dollars.Refinancing can be a great option if you have improved your credit and want: lower monthly payments OR a longer term on your loanBetter credit can also qualify you for a lower rate than you initially received so that you can pay less overall, regardless of whether or not you want to change your other loan terms. If your credit score has gone down, on the other hand, you may not be eligible for a better rate than your current loan.The most important thing to note when it comes to your credit score is that you’ll want to avoid:refinancing right before or after and other major purposes, as each credit pull will temporarily lower your scorerefinancing multiple times, as doing so could hurt your score, and rates usually go up with additional refinances.Your Cash FlowIf your income has gone down or you want more money in your pocket for added expenses, refinancing your auto loan could make sense for you. Doing so can lower your monthly payments and help save some cash, without having to change or get rid of your vehicle.Refinancing offers tons of potential savings and can be helpful for people who have limited cash flow. For example, if you’re unemployed and need money in your pocket right away, refinancing can lower your monthly payments and even give you the option to take a few months off from making a payment.Before refinancing your car loan, make sure you refinance for the best possible price. Shop around and compare offers before signing any paperwork to make sure you’re saving as much as possible. Unlike the competition, at Auto Approve, we never mark up the rate the bank offers you, so we pass maximum savings on to you. Eligibility For A New LoanWhat makes you eligible to refinance your car? This varies based on the lender, but eligibility can depend on: how old your car ishow many miles you have on ithow much money is left on your loanand other factors If you’re not sure whether you’re eligible to refinance, don’t worry – we can help! Talk to one of our knowledgeable and friendly Auto Approve agents or use our handy online quote form to find out if your vehicle loan qualifies and how much you might be able to save in a jiffy.Interest RatesWith all that out of the way, the final important factor you should consider when deciding when you should refinance your car is the broader picture of interest rates.When it comes to interest rates, things have been all over the place in the past several years, with big fluctuations in vehicle prices and rates. Depending on when exactly you financed your vehicle, average rates may be lower or higher now, and your loan-to-value ratio may have shifted. It’s worth reviewing how rates have changed and how your vehicle’s value has changed since your initial loan when you’re thinking about refinancing.With that in mind, if you’re eligible, it may be a great time to refinance your automobile right now – the only way to know for sure is to check.So, When Should You Refinance a Vehicle?When everything aligns! Many things go into making the decision to refinance your loan, but this article should help you know better what to look for. For many people, refinancing can help save money monthly and pay less over the life of the loan.And the good news is, getting a free quote is easy!There’s no commitment or credit check to find out what rates you might be eligible for, and when you decide to refinance, an AutoApprove agent will help make sure you find the best deal for you and then do the paperwork for you, making refinancing quick and easy. So, whether you’re on the fence or ready to dive into refinancing, get your free quote now.