What do Lenders Look for When You Refinance Your Car?

Refinancing works when you find a new lender to pay off your current car loan. That lender then becomes your creditor and makes their money through the interest you pay on the new loan.

Since SpeedCents is integrated with lenders within all credit tiers, we understand their requirements and our software ensures you meet them before matching you with a bank.

This should give you an understanding of what lenders want to see, and which aspects are most important:
  • Your Credit Score
    We’ve seen loans get funded for people with scores as low as 510. However, you can’t have any bankruptcies, repossessions, more than (3) late payments, open collections above $1k, foreclosures, tax liens or judgements. Oftentimes a low credit score is due to these things being true, but that’s not always the case. PLEASE understand, that your credit score is the #1 factor in your monthly payment. After your perform a free analysis, we’ll tell you if you need to consider improving your credit to qualify.
  • Your Vehicle
    Your vehicle needs to be have 140% - 160% of the value of your current loan (banks call this “LTV” or loan-to-value). For example, if your current loan balance is $20,000 your vehicle needs to be worth at least $14,200. This is going to be a challenge if your vehicle has depreciated way faster than your principal balance. One trick is to add a little extra every time you make a payment to help bring your balance down faster (even $20 can make an impact over time). The value will also depend on your vehicle’s age and the amount of miles it has. Typically lenders want to see cars less than 10 yrs old and less than 120k miles.
  • Your Employment & Income
    Lenders want to know that you make enough money to handle your current debt obligations. They will look at how much you earn each month and how much of that goes to debt. This is called “debt to income ratio”. They may also will have minimum income requirements to be approved.
  • Your Current Loan
    Lenders can only justify taking over your loan if they can make money. They require your balance to be over $10,000 and have at least 36 months left. If it’s too small, it just doesn’t justify the work involved for them to fund the loan and transfer your title.

It can seem like a lot to check all of these things before thinking about refinancing.

There is an easy way to check all of this criteria automatically. You can do that by using a our free analysis tool. We’ll check each one of these to save you as much time as possible. It’s completely free and their is no obligation to take a new loan offer.

If you think refinancing might be right for you, we can tell you for sure in 30 seconds.

Try it now

NOTE: The information contained herein is for educational purposes only and is not legal advice. You should seek advice from a legal professional regarding your particular situation.

PAT BENNETT
May 08, 2018