Auto Refinance Questions | Refinance FAQ - OpenRoad Lending (2024)

FAQs

Should I refinance my car through OpenRoad? ›

OpenRoad Lending only offers auto refinance loans for people meeting a relatively strict set of conditions, although it is forgiving of poor credit. Refinance loans may be extra-expensive for applicants with poor credit, but on the flip side, the lender offers lower-than-average rates to applicants with good credit.

A lender may not approve you for a refinance unless you meet a certain loan-to-value ratio (LTV). The LTV is the loan amount divided by the appraised value of your car. Check if you'll meet this requirement by finding the value of your car using online resources.

You may pay more in interest. You may have to pay fees. You could increase your odds of going upside-down.

You could pay more in interest

If you refinance to a longer loan term to reduce your payment, you may actually pay more overall because of the additional months of interest you pay. Even a reduced rate may not offset the cost of continuing to pay interest for an extra year or two.

Consequently, refinancing a car loan — which involves applying for a new loan — could temporarily ding your credit score. It lowers your accounts' average age: Refinancing also lowers your average age of accounts, leading to a possible decrease in your credit score.

Key Takeaways. Don't refinance if you have a long break-even period—the number of months to reach the point when you start saving. Refinancing to lower your monthly payment is great unless you're spending more money in the long-run.

Refinancing can save you money if you get a lower interest rate, but you could also end up paying more if you refinance simply to extend the loan term. Refinancing can help you consolidate debt or tap your home equity for extra cash for renovations, but it can also lead to more debt.

The bottom line

You don't have to lose any equity when you refinance, but there's a chance that it could happen. For example, if you take cash out of your home when you refinance your mortgage or use your equity to pay closing costs, your total home equity will decline by the amount of money you borrow.

Car Loan APRs by Credit Score

Excellent (750 - 850): 2.96 percent for new, 3.68 percent for used. Good (700 - 749): 4.03 percent for new, 5.53 percent for used. Fair (650 - 699): 6.75 percent for new, 10.33 percent for used.

Cars depreciate quickly, so you'll likely only be able to refinance within the first few years of owning your car. Some lenders won't refinance cars that are over a certain age or mileage. For example, some banks won't refinance cars that are older than seven years or have more than 90,000 to 125,000 miles on them.

Does refinancing a car affect your insurance? ›

Your lender may have strict requirements about the type of car insurance you must carry with your loan. If your new lender has different rules than your previous one, refinancing may increase or decrease what you pay for car insurance. Most lenders require comprehensive insurance coverage for any vehicle they finance.

While interest rates aren't at historic lows anymore, other market factors like car values could make this a good time to refinance your car. However, whether it's a good time to refinance heavily depends on your credit situation. If you can get a lower interest rate, it's a great time to refinance.

OpenRoad Lending says it works with applicants of all credit types. Those with lower credit scores can expect rates at the high end of OpenRoad Lending's interest rate range.

If you apply, OpenRoad Lending may run a hard inquiry to check your credit reports, which could affect your credit scores. You'll also need to decide if you're applying with a co-borrower.

Most of the time lenders require down payments, but even if it is not a requirement, it might be a good idea. (Providing a down payment will decrease your monthly payments and reduce the possibility of your car loan becoming underwater.)