Obviously, the economic landscape during the pandemic has been difficult for small businesses to navigate. The forced closures and the number of people leaving the workforce have killed off many companies. If your business has survived, it is probably working with a tight budget. One way to free up some capital is a car refi.
The Goal
The goal may be to reduce the monthly payments and cumulative interest paid over the life of the loan. Getting some “wiggle room” in your budget can allow you to pay off other debts and raise your debt-to-income ratio. That one step can help you qualify for lower interest rates on mortgages and other loans. Your current lender may be able to offer a refi on your vehicle but might decline to do so. You will probably need to find a new lender.
You may have applied for your present loan with a co-signer such as a business partner and choose to remove them from the loan.
A different goal may be to raise the payments and lower the number of payments made to pay the loan off sooner. This saves your company money because you pay less interest over the life of the loan.
Regardless, it may sound like a daunting and time-consuming process. You may be tempted to take the first loan for which you qualify, but that may not be the best loan for you.
The Lenders
Lenders may make loans only on specific types of cars, and yours may not qualify. That adds to the difficulty of finding the right lender. You may be discouraged and wait between loan applications. If several applications come in at once and within 45 days, your credit score will not suffer. A straggling application here and there can knock five points off your score.
The Method
Line up Your Documents
You will need to have information on your vehicle, including its current worth, data on your current loan, proof of your identity and your employment information and proof of insurance. To determine the worth of your car, you can check the Kelly Blue Book and the Edmunds and NADA guides, then average the estimates from all three.
Get Quotes and Apply
It’s best to get quotes from different lenders and apply to at least three. The lenders will perform their own appraisals, verify your identity and your employer and run a credit check before qualifying you for a loan. After getting all the offers, it is important to compare them, especially the total interest to be added over the course of the loan. A lower APR (annual percentage rate) means you will pay less in fees and interest.
Or, You Could…
It requires a lot of “heavy-lifting” to refinance a car loan, according to Lantern by SoFi, which can be avoided by using a refinance service like theirs to shop for lenders that match your goals. You fill out one application, then compare the results that Lantern brings you. Because they work with lending partners, they can pre-qualify you for several loans. You choose the loan and receive final approval. Then, the lender partner pays off your old loan and even titles the car for you. That is all there is to it. You should stay current on all payments until the final approval, and any extra payments will be returned to you.
Refinancing a car can put some life back into a Covid-drained budget. That may be just the thing your business needs to “survive and even thrive” in the current economic environment.
