Many hear the word refinancing and automatically think it is going to be a hassle. When you look at home refinancing, it involves nearly all of the same paperwork as the original loan and can prove to be a headache. But when it comes to auto refinancing, it is an easy process to complete.
There are a variety of reasons that car owners decide to check out auto refinancing. But if rates drop from your original interest rate, car refinancing should be an option you investigate. With so little hassle involved in the process, it can be a great option to save you money.
Here's the differences between auto refinancing and mortgage refinancing.
Amount of TimeThis is due to the enormous amount of paperwork and inspections that must be made before the loan can close. With car refinancing, the procedure is quick and painless.
If you have ever been through the process of buying or refinancing a house, you know it can take up to two months to close.
Unlike with a home, car refinancing does not require inspections and appraisals. There is also not a complicated closing involving the attorneys for both you and the seller. Many times, car refinancing can be handled in a few days, sometimes less, as long as the above mentioned paperwork is in hand.
With an online lender, the auto refinancing process can be even shorter. Many times all of the paperwork can be processed in a matter of hours, not days. With online lenders, the payoff check to your old lender can usually be delivered the day after your application is submitted and approved.
Car refinancing generally offers very little in fees if any at all. Some lenders do charge loan fees for auto refinancing loans and if they do, they generally run no more than $100. Of course, this is in sharp contrast to the fees you can expect to pay for home refinancing, which can costs you thousands.
Auto refinancing is typically a smooth, easy transaction. The only fee you will be required to pay is a lien holder change fee. This fee is mandated by the state and varies depending on where you live. The fee generally ranges from $5 to $65, with your lender having no control over the fee.
Auto refinancing involves significantly less paperwork than home refinancing, particularly if you use an online lender. You will generally have the following documentation with auto refinancing:
1. Limited Power of Attorney: This is a legal document that allows your new lender to transfer the title of your vehicle from your old lender. When you sign this document, you give the assignee the power to sign for anything regarding the paperwork for the car.
2. Odometer statement: Federal law prohibits misrepresenting the actual mileage of a vehicle whether it is through rollback, mechanical problems or by unplugging the odometer. This is a common statement where you certify that the odometer reading of your car is correct
3. Authorization for payoff: This is a statement that authorizes the payoff of your current auto loan. It generally lists the current payoff amount and gives your old lender your authorization to forward the title to the new lender upon receiving the payoff.
4. Authorization to debit account: This is an authorization allowing your new lender to debit your bank account for your monthly car payment. This prevents you from having to remember to send your car payment in and ensures your payment will always be made on time assuming you have available funds in your account. Because of this, many lenders will offer a discount on the interest rate if you agree to this authorization.
You can see that car refinancing is an easy, quick and inexpensive process. It pays to shop around for the best interest rates and terms. A decrease in interest rates can save you hundreds if not thousands of dollars in interest. Another common reason for auto refinancing is to lower your payment with a longer term. Whatever your reasoning may be, with auto refinancing being such an easy process, it's a wise move to take advantage when a better deal comes your way.