Refinance Car Loans

While your car loan may only run over a couple of years, that doesn’t mean you shouldn’t take the chance to compare some of the best car loan rates around and potentially make the switch to a better value deal. Refinancing is that easy. It’s simply making the move from one car loan to another and hopefully saving you some money along the way. It might seem like a hassle, but with our handy car loan comparison table you’ll be able to compare some of the lowest car loan rates around with a single glance, to see just how much you could save.

What should I consider before refinancing?

With plenty of low car loan rates on the market below 6.50%, now could be the time to do a rate check with your own car loan rate. But hold up one minute! Before you start the process of refinancing and making the switch, make sure you consider any fees you’ll need to pay. It can also be worthwhile weighing up whether car loan refinancing is the most convenient option for you to take. After all, making the switch might not be worthwhile if you’re already four years through a five year loan.

So if you’re considering refinancing your car loan, make it easy for yourself by using our handy car loan switch and save calculator. By plugging in a few simple details about your current loan and provider, our calculator will be able to show you just how much you could save on your car loan repayments if you were to refinance.

Just how much would refinancing save me?

Every car owner with a loan is going to be in a different situation when it comes to how much they’ll be able to save by refinancing. It may even be the case that you won’t be able to save at all because you’ve already bagged yourself one of the best car loan rates around. But in case you haven’t, here’s an example to illustrate the benefits refinancing your car loan could have on your wallet.

Two years ago, Emma and her partner purchased a second-hand 2015 Mitsubishi ASX. In order to buy it, they took out a car loan with an interest rate of 8.21% on which they still have $20,000 left to pay. Even taking into account a $200 upfront fee, if Emma made the switch to a low rate car loan with an interest rate of 6.50% she would end up saving $365 over the final three years of her loan.

Interested in finding out how much you could end up pocketing yourself by refinancing? Enter your current car loan figures into the Mozo car loan switch and save calculator to get started.

How soon should I refinance? 

When determining the right time to refinance, it’s a good idea to consider your car loan term length - specifically, how much of the term you have left - as this can help you decide whether refinancing is worth the time, effort and potential cost. 

For instance, if you only have one year of your loan term left, then refinancing may end up costing you more in fees than if you just chose to stick with your last year of repayments. But if you’ll be on a less competitive deal for a number of years before you finish paying off the car loan, then refinancing may be a good option and help you save hundreds of dollars.

What documents do I need to refinance?

Because you’ll be switching lenders when you refinance your car loan, you’ll need to have a few documents ready to go in order for the approval process to run quickly and smoothly.

• Identification: Whether it’s your car loan or credit card, with any financial application you make you’ll need to prove that you are who you say you are. That’s why you should have some sort of identification, like a drivers licence, passport or your medicare card, at the ready when you’re looking to refinance to a new car loan. 
• Address: Aside from your identity, your new lender is also likely to ask you to provide proof of your address. If you own your own home then a mortgage statement will do the trick, while if you’re renting you’ll need to fish out your tenancy agreement or even a bill or council notice with your address on it.
• Finances: You’re taking out a loan after all, so you’re going to need to provide your new lender with some proof that you’ll be able to pay them back. This means offering up something like a payslip, or series of payslips, to show your ongoing income, as well as a savings account statement from your bank to demonstrate proof of savings. Your new lender may also ask you to provide records of any debt you currently owe.
• Insurance: Depending on the lender, you may also need to provide proof that you have a comprehensive car insurance policy on the vehicle which you’re seeking the car loan for.

Are there any catches to refinancing?

Of course. Sometimes the car loan rate you’re currently getting could be very competitive, or it might just not be convenient for you to make the switch if you’re at the end of your loan period.

On top of rates and convenience, you’ll also need to factor in any exit, sign up or ongoing fees you’ll need to pay if you switch from one loan to another. Not all car loan providers charge fees, but for those that do, you could be looking at hundreds of dollars in costs. For example, car loan sign up fees in the Mozo database range anywhere from $0 to $995.

That said, some lenders do make special offers from time to time to waive some of those fees, so it’s always smart to keep an eye out for any promotions out there. 

Another thing to bear in mind before refinancing is that every time you apply for credit, including a car loan, you rack up what’s known as a ‘hard enquiry’. While you won’t need to fuss over one or two hard enquiries on your credit file, it’s when you make too many that this can become an issue, as it makes lenders think you’re financially careless and desperate for credit. In other words, refinancing your car loan too often may land you in trouble when you’re trying to secure other loans down the track, say, a home loan or a personal loan.

Does my car value matter when I’m refinancing? 

Yes, it does, and the reason stems from the fact that cars generally depreciate over time - that is, the moment you’ve paid for your car, it starts to lose its value. If you’re thinking of refinancing but your car has depreciated to a point that it’s worth less than the amount you still owe your lender, then it’s likely you’ll be considered a much riskier borrower, which would make switching to a better deal harder. 

So if you’re looking to boost your chances of getting a refinance, check to see what your car is valued at right now and make sure that it’s higher than your outstanding loan amount. 

Can I refinance a car loan with bad credit? 

While it can be a lot harder to refinance a car loan while you have a bad credit score, you won’t be completely shut from all options. For instance, if you’ve made every repayment in full and on time since taking out the bad credit loan, then your credit score may have actually improved, which means you already stand a better chance of being able to refinance. That’s because lenders would view an improved credit score more favourably (since it shows that you’ve become a lower risk borrower), making it easier for you to switch to a more competitive deal with a new provider. 

But if you’ve been having trouble keeping afloat every month, then it may be wise to spend some time adjusting your budget to ensure you can meet your repayments before trying to refinance.