How to upgrade to a new, improved car loan
It’s common knowledge that it’s possible to refinance a home loan, but you may not realise it’s also possible to refinance a car loan.
By refinancing, you may be able to:
- Reduce your monthly repayments by switching to a loan with a lower interest rate – this might be possible if you didn’t shop around at the time you got your loan or your financial circumstances have improved (thereby allowing you to qualify for a better rate).
- Reduce your monthly repayments by switching to a loan with a longer loan term – but think carefully before going down this path, as you will end up paying more interest over the life of the loan.
- Reduce your life-of-loan interest bill by switching to a loan with a shorter loan term – in return, your monthly repayments will increase.
- Access a better loan product – you may now be able to qualify for a loan with lower fees or more flexible repayment options.
- Consolidate debt – you may be able to roll other debts into your car loan, in order to reduce your overall interest rate and simplify your finances. This isn’t the right strategy for everyone, so speak to your broker to see if it is right for you.
- Remove a co-borrower or guarantor from the loan – this can be done only by closing out the original loan and refinancing to a new one.
- Remove a balloon payment from the loan – this could potentially reduce your life-of-loan costs, although your monthly repayments will increase.
Refinancing process explained
If you want to refinance, reach out to your broker to compare a range of lenders and help you to find a great loan.
Furthermore, we can explain the pros and cons of refinancing, so you can make an informed decision about whether it’s right for you. This includes crunching the numbers to make sure the benefits of refinancing outweigh the costs.
If you decide to proceed, here’s how the process will work:
- We’ll request documentation from you, in order to apply for a new loan on your behalf. (Refinancing means, technically, opening a new loan, which is why you have to submit a new application.)
- We’ll manage the application process for you – including responding to follow-up queries from the lender – to minimise your stress and workload.
- Once your application is approved, your old loan will be paid off (by your new lender) and you’ll start making repayments on your new loan.
As part of the loan assessment process, the new lender will check your credit score. To avoid nasty surprises, it can be a good idea to order a free copy of your credit report from Equifax or Experian. (You’re entitled to a free copy every three months). We can help you get your credit report.