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When & How To Refinance Your Used Car Loan

mahindra-finance-author

by Mahindra Finance

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May 13, 2024

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4 mins read

Are you looking to save money or improve the terms of your used car loan? Refinancing could be the solution you need. By taking advantage of lower interest rates, improving credit scores, or adjusting loan terms, refinancing can help you secure a better deal on your vehicle loan. 

In this comprehensive guide, we'll explore when and how to refinance used car loan, providing you with valuable insights and practical tips.

When to refinance used car loan?

Refinancing a used car loan can be a smart financial move if it helps you secure a lower interest rate or better loan terms. Here is when you should go for it:

  1.  Interest rate reduction: Keep an eye on interest rates in the market. If they have decreased significantly since you obtained your original car loan, refinancing could result in substantial savings over the life of the loan. By refinancing old car loan at the new rate, you could potentially save thousands of rupees over the course of the loan term.
  2.  Improved credit score: If your credit score has improved since you initially took out the loan, you may qualify for a competitive interest rate. Lenders often reward borrowers with higher credit scores by offering more favorable terms. With this improved credit score, lenders are more likely to offer a lower interest rate when you refinance old car loan.
  3. Change in financial situation: If your financial situation has improved, you may have more options for refinancing. A stable income and reduced debt load make you a more attractive borrower. An improved financial standing puts you in a better position to refinance old car loan and potentially secure better terms.
  4. Loan term adjustment: Sometimes, opting for a short-term loan can lead to higher monthly payments that become difficult to manage. In such situations, refinancing to extend the loan term can provide relief and save you from the cost of paying more interest over time.

How to refinance your old car loan?

Here are the steps to refinance your old car:

  1. Check your credit score: Get a copy of your credit report and check your credit score. A higher credit score increases your chances of qualifying for attractive used car loan interest rates.
  2. Research lenders: Explore various lenders, including non-banking financial companies (NBFCs) and lending institutions. Compare their used car loan interest rates, terms, and fees to find the most favorable option.
  3. Gather necessary documents: Check your eligibility & documents before applying for refinancing. Ensure you have your bank statements, pay stubs, and other income-related documents readily available when applying for a refinance old car loan.
  4. Complete the refinancing process: Once you have selected a lender, complete the necessary paperwork and finalise the refinancing process. 

Conclusion

Refinancing used car loan can be an intelligent financial decision, especially when market conditions or your personal circumstances change. Whether it's securing lower used car loan interest rates or adjusting loan terms to better suit your financial situation, a refinance used car loan empowers you to save money.

At Mahindra Finance, we understand the importance of finding the right financing solutions for your needs. If you're wondering how to refinance your used car loan, explore Mahindra Finance's flexible options and competitive interest rates.

FAQs

Q1: Can I refinance my used car loan if I have a bad credit score?

A: Explore different lenders that offer refinancing options specifically tailored to individuals with lower credit scores.

Q2: How long does it take to refinance a used car loan?

A: On average, it may take anywhere from a few days to a few weeks to complete the refinancing process.

Q3: Can I refinance my used car loan if I still owe more on the car than it's worth?

A: Some lenders offer options for borrowers in such situations. Explore lenders who specialize in working with borrowers who have negative equity in their vehicles.

Q4: Will refinancing my used car loan affect my credit score?

A: When you apply for refinancing, the lender may conduct a hard inquiry on your credit report, which can temporarily lower your credit score.

Q5: Who is eligible for car refinance?

Individuals with a minimum earning of Rs. 2,50,000 per year. It includes the income of the spouse/co-applicant. People who own a car and have paid at least 12 EMIs if there is an active loan on their car.

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