Refinancing Your Car Loans

Have you noticed better car loan rates and want to make a switch? You can refinance your car loan – learn how.
If you are unhappy with your current car loan arrangement or have had a change in financial circumstances, refinancing your car loan may be an option for you. Below are a few of the more common reasons borrows choose to refinance their car loans.

  •  By refinancing, you may be able to reduce your overall interest repayments saving you money. Moving to a lower rate can also reduce your monthly repayments to help with monthly budget management.
  •  Poor customer service from current provider
  •  Purchasing a newer or second vehicle
  •  Accessing equity of the vehicle

How It Works

Refinancing your car loan means to switch to another provider, a lender who can provide you with some form of advantage over your current provider. Lower interest rates, better rewards and service, or even convenience could be some of these advantages.

  •  There are two main for identifying a lender.
  •  Use a financial broker – they have access to numerous loan products and can provide you with loans that best fit your circumstances. You are limited to the lender partnerships they have.
  •  DIY online – The internet makes it easy to quickly research and compare local and national lenders.

Things to Keep in Mind While Researching

Interest Rates– The main reason to switch loans is to move to a lower rate – be careful of introductory rates that change after a set period.

Fees– New account fees, exit fees, administration fees, late fees and the like are all things that could tally up the costs, and potentially ruin any savings you could see.

Elasticity– Your refinance option should be flexible compared to your current loan. This is in regards to what flexibility is available on late payments, redraws, or other things of that nature. The ability to pay out a loan in full without penalty is something to consider.

Duration– How long are you going to need in order to pay off your new, refinanced car loan? Determine how long or short you require your loan to be before undertaking this process.

Car Loan Refinancing Options

Bank Finance – Consider speaking to your current bank as they may provide you with quick competitive finance based on your relationship with them.
Car Lot Finance – This can be an option but tends to be a bit more expensive than other lenders. If you are able to negotiate terms that deliver on what you are looking for, this could be a possibility.
Online Lenders – One of the cheapest options is that of online specialist lenders. They tend to have some of the most competitive loan products available.
Credit Unions/Non-Bank Lenders – These lenders are similar to the banks but generally have lower rates and costs. Consider checking with your local credit union or community bank to compare loans. *Tip – Ask current providers if they will match your new offer, this can save you time and provide you with the benefits you are looking for.

Benefits and Drawbacks of Refinancing

  • Lower Interest Rates – One of the main reasons why people refinance their car loan, is to save money in interest repayments. As variable rate loans change with market conditions, there is no guarantee you’ll pay the same price the whole way through. However, this gives you an advantage when searching for alternate finance options. You can also look for a fixed rate term if you are not already on one
  • Repayments Can Be Lower – A lower rate will provide a lower monthly repayment. This is ideal for those who need breathing room with their monthly budget. Alternatively, it can also help others pay their loan off quicker through higher monthly repayments
  • More Features – There may be the option to have some key features present in your refinance than you did with your original loan. If this is the case, many times it is extremely beneficial to refinance your car loan and take advantage. For example, some may offer redraw facilities or even make extra payments without incurring penalties
  • Might Cost You More in Interest (Long Term) – The problem with many refinancing options is that, in the end, you may have to actually pay more interest. By extending the terms of the loan, you will pay interest for a longer period. To offset this, it is important to make more than the minimum repayment where you can.
  • Exit and Admin Fees – As with many loans these days, exit fees and administration costs are almost as certain as death and taxes. Make sure you consider all costs before going through with your refinance.

Applying for Refinancing Loans

Before applying for any form of credit, it is important to read the terms and conditions carefully. Be clear on all points of the contract and ask for clarification for areas that you don’t understand. In some instances it is good to ask for responses in writing. Be wary of high pressure sales tactics.

General loan criteria include:

  • Minimum of 18 years old
  • Be in a current car loan with equity
  • Be an Australian Citizen or, at least, permanent resident
  • Be employed

Whilst there are numerous reasons why one may consider refinancing their vehicle loan, it is important that you are putting yourself in a better position. One of the best questions to ask yourself when considering a switch – is it worth it. Check this by weighing up all costs and benefits and comparing.

commonly asked questions

If it is with the same provider, it can be a matter of minutes. If it is with a new provider it is dependent upon their processes but shouldn’t be longer than a normal loan.

This really depends on the financial benefit you are looking to receive.

Yes, as there is collateral attached to this type of loans (being the vehicle) many lenders will consider impaired credit. Be aware rates may not be as competitive to those with no credit impairments.