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Do you need to refinance or trade with your vehicle? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering interactive financial calculators and tools, publishing original and objective content. This allows users to conduct research and evaluate information for free - so that you can make financial choices with confidence. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this website are provided by companies that compensate us. This compensation can affect the way and where products appear on the site, such as for instance, the order in which they be listed within the categories of listing, except where prohibited by law. Our mortgage or home equity products, as well as other products for home loans. However, this compensation will have no impact on the information we publish, or the reviews that you read on this site. We do not cover the universe of companies or financial offerings that could be accessible to you.



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5 min read Published March 02, 2023
Authored by Kellye Guinan Written by Personal and Business Finance contributor

Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal finance. She's also a full-time librarian at the local library which she assists her local community to get information on financial literacy, in addition to other topics.







Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to take control of their finances with precise, well-researched and well-researched content that breaks down complicated topics into digestible chunks.









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Refinancing and trading in your vehicle are two distinct procedures, and neither is better nor worse than the other. The advantages and disadvantages of each depend on what you want to achieve with your vehicle and your financial situation. Do you prefer refinancing or trading your car better? Both refinancing and trading in your car can save you money, but the most effective choice for you will be based on your objectives. It is the most appropriate option for those who want to stay to your current vehicle however you want to alter the conditions of your loan. You may qualify for an interest rate that is lower when your credit score has improved since the time you first took out your auto loan. This will result in a lower monthly payment and less interest paid all-around. Making use of your car to pay for your mortgage allows you to supplement your down cost. If you're looking to purchase a different vehicle, selling it -selling to a dealership can provide you with more cash to work with. It could also lead to more favorable loan conditions since you will be able to get a lower interest rate on your next vehicle. Refinancing instead of. trading in a car . You can refinance a car loan through the current or new lender. If you are lucky it allows you to lower your interest rate or obtain the option of a longer loan duration. Both of these will reduce your monthly payments and help make your vehicle loan affordable every month. But, refinancing is likely to cost you more interest. While refinancing can be an option for those who are happy with your current vehicle There are lenders who have specific requirements that you must meet to qualify. Making a trade in your vehicle is a simpler option. Once you research the value of your vehicle and then you are able to visit various dealerships to determine what they will offer you. The end goal is to sell your vehicle and use the money to . If you have any left over, you can utilize it to make the down payment you make for the next car. In the end, it's an ideal option if you would like to try something new and know you can get a good deal on a new loan -- and the purchase of a used or new vehicle. How do you refinance your car? Refinancing is essentially similar to . It's more beneficial than selling your car if you enjoy your car and want to lower your monthly installment. If your credit has improved or you have equity in your car , or you're looking to add a co-borrower, then refinancing is the way to move. 1. Take your documents. It is important to know the amount you owe on your car and your credit score. Lenders will also need to verify your financial records and know more about your vehicle, such as its model year and current mileage. 2. Study rates and lenders. Check out and the common conditions of lenders. In addition to having excellent credit and solid financials The majority of lenders require that your vehicle is under 10 model years old and less than 100,000 miles on it. Many lenders also require an minimum loan amount you'll have to meet in order to be eligible. 3. You can apply to several lenders. Much like a new auto loan one should apply with banks, credit unions , and online lenders. This allows you to examine rates without impacting your credit score. This allows you to pick the best refinance option. 4. Check out how the loan will be paid off. When you sign the loan documents, make sure the lender or sends you funds needed to pay off your loan or pays it on your behalf. You will need to keep making payments until your current loan is paid off. What is the process for trading your car works . Dealers want to make trading in your car part of buying a new vehicle, but it's a distinct process -- and should be handled separately. It is possible to shop for your trade-in with multiple dealers, even if you choose not to buy a new car using the dealer you select. 1. Find out the value of your car. Sources like Kelley Blue Book and Edmunds list average sale prices for a range of cars. Make sure you're getting the best price in exchange for your used car. 2. Check your loan. Each vehicle appreciates in value. But if you owe an amount, it may make it difficult to trade in. Although you can still trade it in, you could be required to pay for the rest of the loan when the selling price is not enough. 3. Be prepared to bargain . Like buying cars, you could bargain your trade-in. If your vehicle is in excellent condition considering its age, and has relatively low mileage, you might be able to squeeze more money from the dealer. 4. Transfer the keys. If you have found an auto dealer to trade in your vehicle and then sign any paperwork and then transfer the title. From here, you will be required to pay off the car loan and use that cash as part of your down payment towards the next car you purchase. How can you lower your monthly payments There are several additional options you could consider to however, some of them may end up costing more in the end. Pay off your debts in advance Most lenders will allow you to defer your payments for up to three months in the event of an immediate financial crisis. However, you can't defer the entire payment. Instead, the lender will add it until the end of the loan period. So, not only will you have to make up the payment in the future, but you'll be responsible for additional interest. It is however an option that is often used when you genuinely can't afford the monthly installment. Just be aware that deferral is limited and will not reduce the overall cost of the loan. You could also be charged fees and penalties, which will be outlined in your agreement for forbearance. To begin a deferral you'll likely need to submit an application for hardship for your lender. The letter should explain the reason you have to delay payments and when you will resume them. The lender will then ask for financial information that supports your request and helps establish the hardship you are experiencing. Not everyone is granted a deferral. For example, if your credit score isn't excellent or your income is declining, you may not qualify. Request a loan modification instead of refinancing with a new lender You can also try . It might allow you to increase the loan term -- which could lower your monthly payments -or alter the rate of interest. This being said that a lender may not be willing to change your loan. The responsibility for repaying your loan at the time you sign your contract consequently, your lender might decide to decline your request. You can try it however it won't be as efficient as refinancing. Pay biweekly If you struggle to pay a huge lump-sum monthly payment, you can try splitting it into two. It will be the same payment, but it could better align with your pay schedule. As an additional bonus, biweekly payments tend to result in less interest accruing on your loan. It is best to cut back on other costs so that two payments won't put extra strain on your budget. However, biweekly payments make up the same amount every month, so it's not going to be a solution if your payments are already excessive. The next steps, ultimately when you decide to trade in or refinance your car is based on what you'd like to get from your vehicle. A refinance is the best option if you want to keep driving it however you require different terms on your loan. If you'd like to switch things up and get a new car then you could trade in your existing vehicle to make up the difference in your down payment. In general, it's a good idea to put between 10-20 percentage down when buying a vehicle with a trade-in can help ease that burden. In any case, you should be sure to research and understand the value of your vehicle prior to searching for lenders or visiting the dealership.


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Written by Personal and business finance contributor

Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal finances. She's also a full-time worker at her local library where she helps her community get information about financial literacy, as well as other topics.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are enthusiastic about helping readers gain confidence to control their finances with concise, well-researched and well-written data that breaks complex topics into manageable bites.






Auto loans editor




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