When is it best to refinance a vehicle
Car refinance mistakes | DON'T MAKE THEM!
hey what's going on everybody hope you
having a good day as always my name is
Michael and thank you for joining me
today I want to talk about some common
misconceptions people have about
refinancing their car loan all right
this is a topic I've talked about many
other videos but to this day I still get
emails and questions about the whole
process because some people are still
confused and it really is a process that
if you don't understand fully going into
it that you may actually make some
mistakes that aren't in your favor so
let me just talk about a few of these
things they're not going to be addressed
in any particular order and again if
you've got any questions still put it in
the comments section below I'm happy to
answer them for you but let's go ahead
and get started now the number one
mistake I see people make is they go
into the refinance process really only
looking to save money on their monthly
payment and I'm not saying having a
lower monthly payment is a bad thing but
I think that's the wrong way to look at
a refinance right lowering your monthly
payment helps you out in the short term
but it doesn't necessarily help you out
in the long run or at least not always
right you should look at it this way
you've got your original loan amount
right that's your principal balance but
you've also got your remaining interest
right that's determined by the term link
it's determined by the interest rate you
get and if you add both of those numbers
together that's gonna be the total
amount that you pay on the loan and
that's the number I would focus on try
and get that number as low as possible
right and if you just have a smaller
monthly payment well there's ways to do
that where you actually you pay more in
the long run and to me that's a mistake
for your personal finances right again
it's not worth paying a little bit less
each month to pay a lot more in the long
run so again really simply do not
approach this from a standpoint of I'm
only trying to save money on my monthly
payment look at the bigger picture now
tying this into the next topic let's
talk about term links because I still
have a lot of people email me with the
misunderstanding that you know
refinancing means you have to start all
over on a loan and that's not true right
let's say you got your your original car
loan for 60 months you've been paying on
it for a year so now you have 48 months
remaining well you don't have to start
all over it's 60 months right
refinancing means you're changing the
loan terms and that's going to mean your
term length it's gonna mean possibly
interest rate you know the loan amount
that you're gonna finance now is
different than the loan amount you
financed in the beginning because you've
paid off some of the principal
refinancing changes everything so if you
want to keep your term like that
well then keep it at 48 months if you
want to shorten it down to 36 months
because you can afford to do it and you
want to pay off the loan faster then do
it that's absolutely a great thing to do
I wouldn't necessarily recommend you
stretch out the long term to get a
smaller monthly payment we talked about
that earlier but if you really
absolutely wanted to you can so again
you do not need to start all over the
term link is going to be your decision
also I will say real quick that the
shorter the term length more than likely
this smaller the interest rate most
banks and credit unions are going to
give you a smaller interest rate for a
loan let's say that has 36 to 48 months
rather than a loan that has 60 to 72
months so again if you can afford to
have a shorter term take advantage of it
now the next thing we should talk about
is credit score and how it affects you
in your refinance process because way
too many people feel that like if you
don't have a perfect or high credit
score that there's no chance of it
getting approved and that's simply not
true
well credit scores have a huge impact on
whether or not alone gets approved or
not that's not to say that if you've got
a high credit score you're guaranteed to
be approved and it doesn't mean that
just because you have a low credit score
that you're going to be denied alright
there's a whole host of other factors
that go into the decision making process
like how long have you been at your job
what's your income situation like what's
your total debt load your loan to value
on your car that's a huge part of it
right just because you have a high
credit score the bank doesn't want to
make a loan for $20,000 if your car is
only worth $8,000 right and let's say
you've got a 600 credit score but your
car loan is $10,000 and your car is
worth $20,000 right
you have a much better chance of being
approved because there's less risk in
that loan so again loan-to-value how
long you've been at your job your income
total debt look all of these things go
into whether or not you get approved not
just credit score so if you feel like
hey my credit score isn't the best don't
feel deterred if all these other things
are are good positive features for your
loan application next I want to talk
about a mistake that people make when
they only try to refinance with their
current lending institution all right so
if you got the loan with bank a right
you want to try and refinance with bank
a which to me could be a mistake right
because if you've got the loan with like
a major bank more than likely their
rates are a little bit higher than
credit union
or smaller community banks and you may
be better off trying to take that loan
elsewhere right and if you're at all
interested in finding a place to
refinance check out my video down below
on rate genius they're a company based
out of Austin Texas but they work with
credit unions all over the US and trying
to help people get the lowest rating if
you've watched my channel at all for a
while like I'm a huge credit union
advocate so I absolutely love those guys
check out the link down below but again
it really comes down to finding the best
interest rate you can and if you're with
some you know major bank or let's say a
dealership that offered you a way to
have an interest rate to begin with
don't necessarily feel like you have to
refinance with those guys there's plenty
of other people that want your business
do yourself a favor and find the
institution that's going to help you out
the most the next thing we should talk
about is co-signers all right people
make mistakes when it comes to either
adding or removing a co-signers during
the refinance process and I'd say add
and remove because you may want to do
different things for different
situations right if you've got a loan
with the cosigner because maybe your
credit score wasn't the best right now
well when you refinancing your credits
improved there's no point in keeping
that other person on so you know if you
want to take them off that's the time to
do it when you refinance likewise let's
say you got the loan by yourself and
sure maybe your credits improved a
little bit and you can refinance but
maybe your wife or your husband has a
better score well if they want to add
them on at that point just because you
originally got the loan by yourself
doesn't mean you can't add a cosigner
would later on when you try and
refinance so take advantage of both of
those situations next let's talk about
something that if you do incorrectly can
mean the difference between an approval
and a denial and that is how much to
apply for now this may seem like a
really really no-brainer topic but a lot
of people have the misunderstanding that
you apply for your principal amount plus
the remaining interest right that is not
at all how you should apply for it all
you apply for is the current loan amount
and if you don't know exactly how much
that is just call up your lender ask for
a 10 day pay off and that is the loan
amount to apply for because if you apply
for you know your loan amount plus your
remaining interest then it is absolutely
not an accurate representation of how
much you owe and it's going to look like
your loan to values way out of whack so
again make sure you're applying for the
right dollar amount now the last thing
that
talk about is this idea that it costs
money to refinance right and that's not
true and if you're all trying to
refinance a car loan and this place is
trying to charge you a fee to do that do
not do business with them outside of
like maybe a title transfer fee which is
like thirty fifty dollars right do not
pay them any fee to do this loan for you
right they're incentive to give you this
loan is the interest that they're gonna
collect in the long run right this is
not like a mortgage where you're going
to have like loan origination fees or
anything like that
so really simply do not pay fees to do
your loan refinance but all in all those
are the things that came to my mind when
I look back and thought about all the
things that people misunderstand about
the car refinance process again if
there's anything that isn't clear put it
in the comment section down below I'm
happy to answer them for you likewise
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take care I'll see you all next time hey
guys I know I just said this stuff but
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care and have a good day
