Your auto loan refinance rates can go up or down depending on several factors, including having more funds for your business. Knowing what these factors are can help you get a low rate when refinancing your company vehicle.
Doing more with what you have is essential in running any business. Sometimes, you may choose to refinance your company vehicle when you feel it is the right time. There are many reasons for refinancing your auto loan. If you do, you should know what can impact your refinance interest rates. This can determine if it will be good for your business if you make this move.
Finances can improve over time. Maybe it is time to see if you can refinance your company car loan. You can save more money for your business and even change some loan details. Below are the five major factors that can affect your refinance rates.
1. Your LTV (Loan-to-Value) Ratio
Your lender will consider your LTV ratio to decide if you can refinance your car. This factor can show your lender whether you are ideal for refinancing or not. Your lender will look at the value of your car and loan amount. Your LTV ratio is 100 percent if your loan is the same value as your vehicle. Owing more than your car’s value means that your LTV ratio is more than 100 percent. This will make it difficult for you to refinance your auto loan.
Your LTV ratio may affect your interest rate. A higher interest rate will compensate for your high LTV ratio. This will result in high monthly payments. But if your LTV ratio is low, you are more likely to be able to afford the monthly payments. You can then do better with your car loan refinancing.
2. Your Credit Score
This factor can help determine if your lender can approve your car refinancing. Your credit score can also affect the interest rate you get. Each lender has a threshold that he’s not likely to go below. Your credit score can set the loan terms. Meanwhile, your credit score will determine the amount your lender can finance. Improving your credit score can lower your monthly payments.
3. Your DTI (Debt-to-Income) Ratio
This factor indicates your financial ability to pay your auto loan. Your lender can calculate your DTI ratio by getting information about your monthly gross income and monthly payments. But you do not need to feel bad if your DTI ratio does not qualify, since you can improve this figure. Lowering your DTI ratio will let your lender see that you pose less of a risk when it comes to car loan refinancing.
4. Your Pre-tax Income
Your lender will want to make sure that your new car loan payments will be lower than what your budget can afford every month. A monthly payment that is much higher than your gross monthly income can still be decreased. This is possible by getting a smaller loan and a longer-term. This can help you spread out the payments over an extended period. It can then lower your monthly payment. Getting a raise can be the right time to refinance your vehicle.
5. Your Early Repayment Penalties
Most car owners do not pay attention to early repayment penalties when they refinance their auto loans. Even so, repayment penalties have a strong impact on interest. Large early repayment penalties are harmful to your finances. You should compare your savings after refinancing with the penalty you need to pay for early repayment.
The Benefits of Auto Loan Refinancing
Choosing to refinance your car loan can bring many advantages. Paying lower monthly rates is the most significant advantage of making this decision. This means monthly savings that could go to more essential needs for your family or business. Refinancing your car loan will also allow you to add or remove a co-signer who has a healthier financial standing than you. A co-signer is also willing to take some of the risks.
You can change your financial institution and refinance your vehicle with a different one. Starting out on a car loan can make it difficult to see what it truly entails. After some time, you realize you may have a better experience with another lender. Refinancing can give you this opportunity. Choosing a small credit union or bank can also provide you with better customer service than a major lender.
The Bottom Line
Paying attention to these factors can help approve your refinancing and lower your interest rate. This could be a good start for you as a car owner. The money you save can help fund your business and even allow you to make other important payments. Working with your lender and improving your credit can start your journey to your car loan’s refinancing