An auto refinance can save you money on monthly payments by lowering the interest rate you’re paying. Recently, record low rates have made auto refi’s a popular option. Having your credit score improve or the current interest rates drop are good times to do so. There is usually a fee included when refinancing that can vary anywhere from $5 to $100 for lien holder transfers and/or state regulation fees, but you should recoup this cost in the long run. The fees may vary by state and lender. When transferring your loan make sure your new lender doesn’t have any pre-payment penalty fees. This could also effect your bottom line making the refinance irrelevant.
Will an auto refinance affect my credit?
Refinancing in itself will not affect your credit score. However, it does affect your credit if you pull too many credit inquiries. Going directly to a lender is the safest way to make sure the report is only pulled once. When refinancing through a dealership they pull your credit multiple times because they have to send it to multiple lenders to get the best payout for the dealership. Many inquiries in a short period of time can lower your credit score, but only by a few points.
When refinancing you are essentially paying off your loan and taking out another with the new interest rate. If you choose a different lender to work with the title is also transferred. Paying off the original loan will improve your credit score and making payments on time and frequently will also increase your score. This should offset any multiple inquiry dings you received before.
How much will I save by refinancing?
The amount you save will vary by many factors:
- The new interest rate based on your original rate
- Your existing loan’s remaining balance
- The term of your loan