How to Refinance a Car With a Credit Union
You may not have to wait until your car loan term ends to qualify for a lower interest rate. If you refinance a car with a credit union at the right time and under the right conditions, you could save hundreds and sometimes thousands.
The benefits of car loan refinancing includes:
- If your credit score has improved since you first qualified, see a more favourable interest rate.
- Extend your loan’s financing term to reduce your monthly payment.
- Remove a co-signer or add a payee if you change the financing terms to reflect your current situation.
Especially if when you initially got your car loan, you had bad credit or a credit history that was not yet firmly established, you were probably given a higher-than-average interest rate. It doesn’t hurt to ask the question, at the very least, of how one can change that and pay less.
Here’s how.
Look Into Your Current Car Loan First
To refinance a car loan, you need to break your current contract. This typically comes with a prepayment penalty.
Look at the terms of your loan and know that number. This will determine how cost-effective refinancing is.
Make an Appointment at Your Local Credit Union
Schedule an appointment to talk to credit unions about getting set up with a car loan. You must sign up if you aren’t already a credit union member. Credit unions are different from banks in this way.
You can keep your bank account and financial information as-is. However, you must be a member to refinance a car with a credit union.
How Refinancing a Car Works
When you refinance, it is like buying the car all over again, except without a price negotiation. The balance owing is the balance, and the discussion is based on how to finance the amount stipulated.
Benefits of Using a Credit Union for Car Loan Refinancing
A credit union is a member-owned not-for-profit financial institution offering financial services and products similar to a bank. Suppose you are a credit union member and apply for car loan refinancing.
In that case, you will discover when comparing a credit union’s offer to a bank’s side-by-side that a credit union offers lower interest rates and will generally offer better terms. Depending on the credit union, they also offer no fees or prepayment penalties.
A credit union proceeds like any other lender. They assess your credit background and vehicle’s eligibility for financing. After you have been approved, the credit union will pay out your current car loan in full after issuing a new financing contract for the amount owed.
How to Qualify to Refinance Your Car
A credit union is not going to qualify any and every member for car loan refinancing. There is a criterion. As an applicant for refinancing, you must make the case that you can pay off the amount you propose to borrow.
To do this, ensure that you have a source of income you can prove, a good debt-to-service ratio proving you can handle payments, a healthy credit score and credit history, and a legal address.
How to Know It’s Time to Refinance a Car
No lender wants to waste any applicant’s time. Suppose your credit score or credit report is not good, and your employment situation is inconsistent. In that case, you may not be able to successfully refinance a car with a credit union or any lender. Generally, a credit score below 680 should not bother with a credit union refinancing.
If everything is good, however, or things have improved for you financially in a drastic way, you can say it’s time to look into refinancing a car, and there’s no better way than with a credit union.
Documents Needed to Refinance Your Car Loan
A credit union will require you to bring forth a mix of information and documents to put on your refinancing application.
- Up to three months of current pay stubs verifying your current income.
- Income tax return information.
- Vehicle information, including the year, make model, trim, mileage, and title.
- Personal identification includes a government-issued photo ID, driver’s license, and passport.
Ask About the Terms to Refinance A Car
When you approach a credit union to apply, alongside discussing interest rates, ensure you also talk about the length of the term, what additional fees there may be to pay, if there are penalties to refinance now or later, and more.
Ask questions and get answers. Have full knowledge of what you’re walking into, and don’t hesitate to try to negotiate a bit if there are terms that you feel are inappropriate for you.
Compare Credit Union Refinancing
After you have applied and see what a credit union will offer you as a car loan, you can compare it with what you already have. See which financing option favours you and your current financial status.
In most cases, a credit union’s refinancing loan will more than outperform a current loan and will be the better pick.
