Refinancing is exchanging an existing loan for a new one, typically with a different lender. Most individuals will use it to reduce their monthly payments. Either by obtaining a lower interest rate or by extending the loan term. But even if you understand the fundamentals of auto loan refinancing, a little expert advice can go a long way when learning how to navigate the process and budget your money for vehicle leasing in Singapore.
Whether refinancing a new or used car, you can position yourself for lower interest rates or better loan terms, making your monthly car payments more manageable.
If you can save money on interest over the life of your loan, refinancing is generally a good idea. However, it is not always a prudent financial move, especially in the current economic climate as interest rates continue to rise; therefore, you should carefully consider it before applying.
Check out these auto refinancing and vehicle leasing tips in Singapore from savvy financial experts:
1. Shop around.
Before applying for a loan, you should shop around and compare interest rates and terms of multiple lenders. And if your interest rate is calculated differently by each lender, it is essential to obtain multiple quotes.
In most instances, you can get preapproved before applying and receive a rate quote with a soft credit inquiry that does not affect your credit score. Once you have received pre-approval for commercial vehicle servicing in Singapore, you can select the best offer and complete the refinancing process. Moreover, if there is no pre-approval option, submit your applications promptly. When calculating your credit score, the multiple inquiries on your credit report will merge into a single query if they occur within a short time frame, typically 14 days.
2. Think beyond the big banks.
Are you looking for the best car refinancing rates in Singapore for auto loans? Don’t limit yourself to only large, established banks. It’s always a good idea to check with local credit unions, whose primary objective is to serve their members, not to generate profits. Check Sesame Credit to compare rates from numerous lenders, including online auto refinancers.
3. Know how your credit score will be affected.
A hard inquiry lowers your credit score every time you apply for credit. If you open a new loan account, it will reduce the average age of your accounts, which could hurt your credit.
However, neither of these elements is nearly as significant in determining your credit score as your payment history; making on-time payments on your new loan will increase your score over time. Therefore, car refinancing in Singapore is unlikely to make a significant difference unless you have recently applied for other credit or have a short credit history.
4. Keep your cool if rejected.
If you fail a personal loan, determine why and if there is anything you can do about it. Does a high balance on one of your credit cards harm your credit score? If so, paying it off could boost your credit score and approval odds. Use these credit score hacks to improve it. And high mileage or older vehicles may reduce your chances of approval, but not all lenders do. Another lender may accept you if one declines.
5. Consider fees.
Consider the impact of fees on your overall savings before you refinance. Some auto loans impose a prepayment penalty, so paying off the loan ahead may cost you more than you would save by lowering the interest rate. In this case, car refinancing in Singapore will not be beneficial. And when you refinance, some lenders charge an origination fee. It can reduce potential savings and make refinancing more difficult than staying with your current lender.
6. Know when you should and should not refinance.
Before spending time and effort shopping for a new auto loan, consider whether refinancing is appropriate for your financial situation.
You may be a good candidate for car refinancing in Singapore if interest rates have decreased, your credit score has increased, or your current loan is from a dealership. Refinancing can also reduce average monthly car payments, free up cash flow, or save for other life events, like having a child or purchasing a home.
7. Check where you already have an account.
In general, it is prudent to begin your search for refinancing with financial institutions with which you already have accounts or relationships. This strategy has several advantages.
Depending on your lender, bank, or credit union, you may be eligible for a loyalty discount on loan fees. And if you have a good track record with the bank, such as making payments on time and maintaining a positive balance, you may be approved for car refinancing in Singapore. Alternatively, if you have a low credit score, a lender you already know may refinance you.
8. Mind the crucial details.
If you’ve found a better rate and are nearing the end of the refinancing process, pay attention to the details. Examine both your old and new loans. These potholes make the road less desirable.
Don’t assume anything is done after you refinance a car loan in Singapore. You may think your personal or joint personal loan is paid off, and you can stop sending payments. However, any delay can result in a missed loan payment, which will harm your credit. Before stopping, confirm with both lenders.
9. Take it one at a time.
When refinancing your auto loan, be careful not to overextend your credit. Don’t apply for new credit cards or home equity loans, for instance, while refinancing. This concurrent action may harm your loan approval chances. Refinance your auto loan first, then, if necessary, apply for additional credit.
If you can qualify for a lower interest rate and will save money in the long run, you should strongly consider car refinancing in Singapore. In the current market environment, you must, however, crunch the numbers to ensure that you will realise the desired savings.
Before proceeding with a refinance, it is crucial to consider how much time remains on a loan. Depending on where you are in the repayment schedule, your actual savings may not be all that substantial or worthwhile. Use a car loan refinancing calculator to determine how much you can save by refinancing.
To refinance your car loan in Singapore, visit Think One Automobile & Trading today!
