Many people who consider refinancing their car loans will ask the question: When is the best time? Refinancing your car loans is possible at any time. If you meet all the requirements to get a new vehicle loan and have better terms than the commercial loan, then you can immediately refinance the car loan.
When the terms of the original car loan are not very favorable, refinancing can help you get a loan to finance your purchase. Refinance your loan to get better terms.
Many people refinance their car loans in order to reduce their tenure. If your loan term increases, you can choose to repay the loan for a longer duration. If you have an objective to reduce your loan term, you’ll need to pay higher EMIs. Be sure to consider the refinance goal before you refinance your car loan.
Is Refinances Possible Within The Bank?
It would be rare for a person to seek refinement from the same bank as the original loan. Banks that provide new loans instead of paying existing debts are also frowned on by the Reserve Bank of India. However, it is possible for the same bank to refinance an existing loan.
Most banks today sell auto loans to third-party buyers and make a commission. The original lender may be open to refinancing the loan at better terms. If the borrower meets these eligibility conditions, an existing lender may be able to offer a supplementary loan with better commercial terms.
Refinances can be done by simply transferring your car loan to other lenders. This is called a balance transfer. The lender offering a lower interest rate will switch the loan. The next part of refinancing entails transferring the existing amount as well as an additional amount.
Benefits from Refinancing Your Vehicle Loan
Refinancing a car loan is dependent on many factors. Before you refinance the car loan, be sure to weigh each factor. In these situations, refinancing a vehicle loan may be an option.
Current interest rates have been lowered: With the fluctuating economy, it may be possible to find a loan for a car with a significantly reduced interest rate than you currently pay. Refinance the loan to reap all the benefits of a low-interest rate.
Your credit score is improving: Each loan application relies on the credit score of each applicant and helps to decide the terms and conditions of the loan. It’s possible that your credit score has been significantly higher since you took out the auto loan. Refinancing a car loan can offer better terms.
Modifying the term of the loan: In some cases, due to a change in your circumstances, you may want to adjust the amortization of the loan. This is where refinancing a vehicle loan is beneficial, as you have the ability to increase or decrease the tenure depending on your needs.
Refinancing your car loan can be an option when you want a co-borrower for the loan.
Eligibility in Refinancing
There are no minimum eligibility criteria for refinancing an auto loan. A new lender will, however, consider the following when considering your loan refinance application:
The Loan Has Not Been Repaid: A defaulted borrower is someone who has lost their payments. Your bank will likely not refinance the loan if you are currently behind on your EMI payments.
The car should be a good investment: Before extending the refinanced loan, lenders will typically inspect the condition of your car. Factors such as age and mileage will be considered.
Credit Score: It is an indicator of how financially sound you are; just like any loan application, success depends on your credit score. Lenders would expect to see an improvement in credit scores compared to when the original loan was extended.