The term ‘refinance’ refers to when you take out a new finance agreement to pay the outstanding balance on an existing agreement. This cancels or pays off the original agreement, leaving you with a new finance package to pay off.
There are a number of benefits of refinancing your car finance agreement. You may be able to get a better interest rate on the new package, especially if your credit rating has improved in the time since you took out the original finance agreement. You also may be able to spread the outstanding balance over a longer period of time, meaning smaller monthly payments which are more manageable.
If your financial circumstances have improved, you may be able to refinance to pay off the debt earlier. You can also gain access to any equity you have in the car through some refinance packages. If you have paid off a high percentage of your car, this is more likely to be available to you. This type of refinance package will give you some extra cash to put towards other expenses, so can be very useful.
Refinancing can also help you if you are having financial difficulties, by making a new agreement that is easier for you to cope with. A new agreement can extend the term over a longer period, making payments smaller and easier to meet.
Refinancing a car finance agreement depends on a number of different factors. In general, you will need to have a good credit rating to be approved for a refinance package, unless you are refinancing as part of a debt management or consolidation deal.
You can contact your existing provider to discuss refinancing your car finance package, but you should also shop around and see what different packages are available. You’ll find that there are many different providers on the market who offer refinance packages, ranging from high street banks to specialist finance providers.
Once you’ve decided to refinance your car finance package, you’ll need to gather the same documents that you had when you applied for the original agreement. You’ll also need any documentation to prove the change in circumstances, to ensure you get a better deal than you’re current one. The new provider will assess your application and ensure all the information and details are correct.
You should then contact the provider, and begin the refinance process. They will contact your existing provider, and begin the transfer process. You should ensure you communicate clearly with both providers, and ensure that, if they ask for anything you respond promptly.
Providing you have satisfied all the requirements of the previous provider, the old agreement will be classed as settled. Make sure you pay any charges or fees that the old provider has in place, otherwise this can be recorded on your credit file.
If you are successful with your refinance application, then there will be a small impact on your credit file as the provider does a credit check to assess your application. However, this will not be on the file for long, especially if you don’t miss any repayments.
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