In 2016, more people bought SUVs whose market share rose to 42% compared to five years ago’s 34% per the J.D. Power 2017 Auto Avoider Study℠. The availability of low-interest loans, together with low oil prices, has contributed to the SUVs’ record retail sales last year, the study noted. If you have financed an SUV and want to get a better rate, a refinance can be your option. How shall you go about an SUV refinance?
Why do an SUV refinance?
Refinancing your SUV can be pretty similar to that of an auto loan refinance. The actual process of verification and underwriting varies from lender to lender.
People refinance primarily to make their SUV debt more affordable and manageable because lower rates come with lower payments. Others refinance in order to shorten the loan term as they can now afford higher monthly payments to pay off the loan faster.
First step: Check your loan and your lender.
Go over your SUV loan documents and examine your monthly payments. How much do you want to save? By locking into a rate that is a notch or two lower than your current rate, you can lower your monthly payments and possibly save on the interest paid throughout the life of the loan.
Check with your lender for any prepayment penalty or early termination fee that you might have to pay when you refinance your SUV loan. This is just some of the costs associated with refinancing that will be deducted from your savings when you refinance.
Then ask for a payoff quote from your lender. This spells out how much you owe plus fees through a good-through date. From there, you can determine how much you need to refinance.
Second step: Check your credit and equity.
You are a step closer to lower rates if your credit score is high and you have a reliable history of repaying your debts. While lenders vary on what they classify as a high credit score, you can use your credit score as leverage to negotiate for a better loan rate.
On the other hand, your finances might have suffered a downturn and refinancing is the only way to ease the burden of repaying the loan. You may still refinance if you have a fair to bad credit but lenders might look for other factors so you can qualify.
Indeed, they’ll examine whether you owe less than the value of your SUV. Lenders want to see equity being built, thus the number of payments before you can refinance. If you are upside down on your SUV loan, you may not qualify for a refi.
Third step: Check SUV refinance rates and lenders.
SUV rates can change any moment that’s why some opt to lock in rates to keep that rate while their applications are underway. But before you can lock in on any rates, make sure you have done enough shopping to determine which rate would save you. Look for the APR, which is the interest rate you get when you borrow, plus any other costs and fees. That’s why the APR is called the true cost of the loan.
Lenders also offer varying interest rates so you have to ask around before you settle for in. They also vary in their requirements for a refinance application, some may be lenient or stricter than the others.