Some important factors can affect eligibility for a car refinance such as a low credit score, negative payment history, and if an individual owes more on the loan than the car is worth. A low credit score is often a red flag for lenders when reviewing an application for refinancing a car. Depending on the requirements of the lender, an individual may not be approved for refinancing if he or she has a very low credit score, especially if it is paired with negative payment history involving late or missed payments to other lenders. If a person owes more on the car than it is worth, it poses a risk to the new lender, but many companies set up plans to help individuals correct this situation.
There are various ways to increase chances of approval for a car refinance, such as financing more than $7,500 and presenting accurate vehicle information (year, model, and vehicle identification number). An additional factor is using loan applications with the same names as the existing loan to quickly locate the current loan. A stable address for at least six months also increases the chances of approval because lenders are able to verify the address and income.
Refinancing a car helps individuals save thousands of dollars per year, which benefits overall finances in the long run. It reduces monthly payments on the loan and decreases interest rates, which lessens the chance of missing payments. It also helps individuals pay off the loan faster, which boosts credit scores.