However, it often turns out that the residual value of the car no longer covers the loan amount to be paid. The borrower is targeting a car loan refinance. Usually, many car buyers believe that the residual value of their car covers the standing loan amount. They fall out of all clouds if they are not.
Many borrowers are simply tempted to take out a car loan without checking the terms of the lender. After a while, it is found that other banks have much better conditions. As a result, a car loan is to be refinanced. This fact also makes one think about refinancing a car loan.
Refinance a car loan – pay attention to favorable conditions
The current low interest rate can refinance a cheap car loan. Often, several hundred USD can be saved if an old loan is replaced with a new loan. For loans that were taken out after 2010, the regulations of the consumer credit guidelines apply. This allows a right of termination at any time.
In addition, the prepayment penalty was reduced to 1%. If the loan only has a term of 12 months, only a prepayment rate of 0.5% can be calculated. Borrowers should know that the higher the prepayment penalty, the greater the interest savings between old and new loans.
This is the only way to make debt restructuring sensible. When refinancing a car loan, a loan comparison should be made beforehand.
With a loan comparison for a cheap car loan refinancing
The term debt restructuring means that an old contract is terminated before the end of the term. Debt restructuring should, however, reduce the burden, which is achieved through favorable conditions.
Therefore, current offers for car financing should be compared with a loan comparison. How to replace a car loan should be done with a car loan calculator. It can be used to determine how high and whether savings will be made through debt restructuring. The credit comparison also provides information about the interest and the amount of the credit rate. Before borrowers refinance a car loan, the old loan contract should be checked in any case.
Here are the notice periods and whether a prepayment penalty may apply.
Take the right steps
If you want to refinance a car loan, you must first determine the remaining debt of the old loan. The aforementioned prepayment also plays a role. The loan amount can then be used to search for a cheap provider. Borrowers should consider that the higher the loan amount, the greater the burden.
If only a loan amount of over 10,000 USD is required, then it does not have to be 15,000 USD. Banks always like to speak of the financial buffer customers have with an increased loan amount. But the borrower shouldn’t fall for that. Residual debt insurance is often offered to protect against unemployment and death.
There is to be said that these contracts should be read carefully. Because insurance doesn’t always come into play just in case. This insurance also increases the loan enormously.
Pay attention to the notice periods
If the car loan was found to be refinanced, the old loan should be repaid on time. The new lender often takes care of these formalities. The customer gives the lender a power of attorney for the old loan. With regard to the notice periods, it must be ensured that there is a notice period of three months for a variable interest rate.
In the case of a fixed interest rate, the notice period ends when the fixed interest rate ends. Loans must be canceled in writing. However, once a loan has been taken out, the borrower should know that he has to wait six months before he can redeem or cancel the loan.
Refinance the car loan – makes sense in case of bad credit bureau?
Anyone who has a negative credit bureau should consider refinancing a car loan very carefully. The bad credit bureau is a reason for exclusion for many lenders. If there is a bad credit bureau there is the possibility to look for a credit bureau-free loan, but first of all, these loans are expensive.
The high interest rate required will make car loan rescheduling no longer seem sensible. In addition, the loan amount is fixed at a maximum of 7500 USD. In purely mathematical terms, a car loan and the replacement of an old loan would probably result in a higher loan amount.
What are the credit requirements?
Of course, the borrower must prove his creditworthiness or creditworthiness. The income is checked. It must be so high that it shows an attachable share. A permanent employment relationship is required. Employment may not be temporary and may not include a trial period. An important factor is the unloaded credit bureau.
If there are negative entries in it, there could be no lender who provides a car loan. If the overall creditworthiness is rather weak, the bank could request the vehicle letter of the car as additional credit security.
The vehicle then owns the bank until the end of the loan term. A disadvantage could be seen if the borrower has a financial constraint and wants to sell the car.
He can’t because he doesn’t own the car yet.
In terms of the type of financing, the borrower can choose between a dealer loan or a bank loan. With a bank loan, he can pay the car in cash and thereby negotiate discounts with the dealer.
This type of financing is often cheaper and the cash payer discount is often granted up to 30%. The cheap offers at the retailer cannot keep up.