Years ago when cars were never financed beyond 2 or 3 years, refinancing a car worked only for people who couldn’t afford the car or had lost a job and needed to extend the terms from one year left back to 3 years. Today with car loans seeming more the size of house loans and repayment terms getting longer by the year, refinancing can often make good economic sense. This is particularly true if you were not able to get a good rate when you first bought your car.
You may have had too short of tenure with your job or a blemish on your credit scores. These can result in less than stellar rates. You may have some additional money to put down now that wasn’t available before. In today’s economy, you may have already paid for 2 or more years and have 5 or more to go to pay that car off. Consequently, you may not want to extend the pay off terms but just lower the interest and payment.
Use the phone. Call as many banks as you can in your general area. If you have to drive 50 miles, it’s no big deal if it can shave 5% from your rate. A car interest rate of less than 9% is probably not going to be improved much unless you can switch it to a home equity loan. A rate of 19% may have a chance of being dramatically improved with additional down and better credit scores.
Make sure that you include the original bank that holds your note in the mix. By having a good payment record for 2 years or so plus other favorable items, they may be willing to compete to keep your loan. You might be able to negotiate away any loan origination fees or have them reduced if you keep your business with them.
Talk to some used car dealers about who they send customers with better credit scores to for loans. You may find some lenders who are willing to take a little extra risk at more competitive interest rates.
Before going in for the loan, make sure that you have asked for what types of paper work and information you need to bring with you. Going in prepared to do business on the spot looks good to lenders. It shows them you are responsible and interested in doing business with their institution.