There's no reason to remain on a loan that isn't beneficial to you.
Your circumstances change: your credit score might have improved and the availability of lenders grew, giving you more options.
In either case, the smartest way to refinance your auto loan begins with self-assessment.
Know where you stand
The stronger the case you present to lenders, the more likely they are to give you favorable terms. Here are some questions to consider as you prepare to refinance:
- What's my credit score now in relation to when I first acquired the loan?
- Have I made timely payments for at least the past year?
- Has my job situation changed?
Since lenders use these factors to determine eligibility, it's important to start here first. If your credit score improved substantially, then you have a case to make for a better rate.
Build your case
Once you answered these questions, it's time to gather rates from other lenders. An expedited option is to use a service such as LendingTree, who will gather quotes from its network of lenders and provide you offers.
You can also mix it up by applying to different types of lenders. Start with your local credit union and an online lender, as they both can offer more competitive rates than a traditional bank. Next, try alternative financing such as peer-to-peer lending.
Peer-to-peer lending works a bit differently than regular loans because anyone can invest in your loan. After applying, if the lender approves you, you receive a risk rating that correlates with the interest rate you could receive.
The benefit of trying this option is if your credit score has vastly improved, you could receive lower interest rates and flexible repayment terms. Once you gather three quotes, it's time to call your current lender.
Make your case
Contact your current lender to ask for an interest rate reduction. This will involve speaking with a supervisor or manager, who will review your account and explain the next steps involved.
If they seem unwilling to comply, you can use the three quotes as evidence you'll receive a better rate elsewhere. This could entice the lender to change their mind, and if it doesn't, you'll have three viable options to choose from that will save you money.