How A Good Credit Report Will Help to Refinance Your Car Loan

If you have been paying your monthly auto loan installments on time and in full every month, then it is about time you considered refinancing the loan. Lenders will often seek to establish that you have a good credit report before extending credit facilities to you and a good credit report history of 6 to 12 months is in most cases sufficient. There might not be any significant difference in your level of income to get a new credit facility but the low interest you get from refinancing could save you tons of money, well, at least enough to cater for other bills. A good credit report is a product of disciplined credit taking and repayment. This is why every incident of repaying a loan if done according to the agreement with the lender, earns points for the borrower. It is these points that cumulatively lead to a good credit report. Are you seeking to refinance your auto loan? The process of refinancing a car loan is actually much easier than people imagine it to be. There are, however, key steps that one needs to take to ensure that it the best option for their situation; first, it is important to go through the terms of the loans so that you can identify clauses that mention penalties upon prepayments. Some lenders have a minimum duration of time during which they require credit facilities to be paid and if this time is reduced by the borrower for whatever reason, a penalty must be paid. In case there is a penalty for early loan repayment, the next step would be to calculate the total amount that will be spent on the loan plus the penalty versus the cost of getting a new facility that offers low credit interest.

The internet has made it very simple to get credit facilities without having to physically move from one office to the other. Most lenders especially those that operate online, have different perspectives on what is a good credit score. Each may have their own minimum value, but they will all favor a good credit report over a bad one. If you seriously thinking about refinancing your auto loan but are not convinced it is the best option for you, here are some scenarios to consider;

You are struggling with bills but have managed to faithfully pay your loan installments on time – every loan or credit facility has an interest rate attached to it. This interest rate is different for everyone although the facility and amount could be the same. One of the factors that influence how much interest a loan is charged is the credit score. While it may not be important to discuss what is a good credit score since it differs from one person to another, it is important to point out that if this score improves, and the holder qualifies for a lower interest rate on loans. With low-interest rates, the installment amount is less and the savings made can be channeled elsewhere.

There is a general drop in interest rates – sometimes, due to changing economic dynamics, interest rates for loans will drop but lenders do not apply the change to existing loans. If you have established that the interest rates for auto loans are generally lower than they were when you first took your loan, you qualify for refinancing. This will definitely save you money you would have paid as interest in addition to clearing your loan early.

The interest on your auto loan was irregularly marked-up – great emphasis is placed on checking one’s personal credit score so as to compare interest rates offered before settling on one. Even with a good credit report, some dealers have been known to offer loans at high interest rates to unsuspecting borrowers. Refinancing is a good way of undoing the damage caused by having an auto-loan with high interest.

A loan can be a costly facility regardless of the purpose for which it was taken. If you qualify or refinancing of your facility at a rate that saves you money, then by all means, apply for it. The only requirement is that you post a good credit report.