Refinancing the loan on your vehicle can be an important tool in helping you save money. This is especially true if your financial situation has recently improved, as lenders could be willing to offer you a lower interest rate and better terms on a new loan.
And if you’re a member of the military, you might be able to access even more benefits and protections that aren’t available to the general public. For members of the military, here’s a look at the auto loan process, the ins and outs of refinancing a vehicle, and some of the special considerations for those in the armed services.
Related: How do car loans work?
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What Is Car Loan Refinancing?
Cars are big-ticket purchase items. This means many people need to use a financing program — be it through a bank, dealership or another lender — to pay for them. In some cases, the interest rates and terms offered on that initial loan might not be favorable. For example, if an individual has a poor credit score, their lender will likely offer them a loan with a higher interest rate.
Later, if that person’s credit score improves, they may be able to refinance their loan with another lender. The process of refinancing involves taking out a new loan to pay off the old one. Ideally, the new loan offers good interest rates or terms that help the individual save money in the long run. For example, a shorter loan term or lower interest rate can save an individual money over time.
Before taking out a new loan, consider both the positive and negative sides of auto loan refinancing.
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Is the Auto Loan Refinancing Process the Same for Military Members?
The refinancing process itself is basically the same for military and non-military members. Essentially, you’re taking out a new loan. In most cases, you’ll fill out a loan application and lenders will take a look at financial information like your credit score and history to determine the interest rate and terms they’re willing to offer.
Generally speaking, the better your credit score, the better the interest rates you’ll be offered and the more favorable the loan terms will be. Lenders will also take a look at the make, model and condition of your vehicle to make loan decisions. For example, if your car is worth significantly less than what you already owe on your previous loan — a situation known as an upside down auto loan — you may have a difficult time securing a new loan.
Also, it’s typically easier to secure a refinance loan on newer vehicles. So, if you’re thinking about refinancing, it may be better to do it sooner rather than later. If your credit rating is low and you’re having trouble securing a loan, you’ll have options. For example, you may seek out an auto loan cosigner with a stronger credit history. Beware that this person will be on the hook financially if you fail to make payments.
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Benefits of Refinancing an Auto Loan in the Military
When it comes to your car, be aware of the advantages you can get if you are in the military: caps on auto loan interest, discounts on insurance, access to some credit unions’ advantageous rates, protection from repossession, and even price slashing on the new car purchase price for certain brands. These things come into play with an auto refinance loan for the military.
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Refinance Auto Loan With Bad Credit for Military Members
If you have bad credit, it’s doubly important to familiarize yourself with the breaks that being in the armed services provide for a military refinance auto loan. You have access to deals and discounts that civilians don’t, like favorable credit union loans for military personnel.
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Obstacles With Car Registration for Military Members
People in the military don’t often stay in one place. Your refinance lender will almost certainly ask to see your car registration when you apply for a refinance loan. When you move, states typically require registration to be updated with their department of motor vehicles (DMV). Rules will vary by state, and some will even waive registration fees for military members.
Most states will require proof of insurance when registering your vehicle, and the address on insurance documents will often need to match registration documents. For military members who move frequently, these steps may be overlooked. However, it’s important to get them squared away before applying for a refinance loan for military.
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Auto Refinance Loan Protections and Considerations for Military Members
When it comes to purchasing a car or an auto insurance policy, or seeking financing, there are some important benefits military members need to know.
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1. Interest Rate Protection
The Servicemembers Civil Relief Act (SCRA) puts a 6% cap on loans that military members took out prior to joining the service. Creditors must retroactively forgive interest that is greater than 6% per year, and they cannot accelerate principal payments as a result of a request for a 6% cap. This cap not only applies to auto loans, it also applies to credit cards, mortgages, home equity loans, student loans and other vehicle loans.
Be aware that any loans, including refinance loans that you take out while on active duty, will not be subject to the same interest rate cap protections.
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2. Car Repossession
The SCRA also provides protection against car repossession. According to the law, lenders cannot repossess your car while you’re in military service without a court order. Even if the creditor does take their claim to court, they could face other hurdles.
For example, SCRA rules may require the lender to return some or all of the payment you made prior to repossession. Or they may require an equity payment equal to the difference between how much you still owe on your auto loan and the value of the car.
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3. Military Financing
Members of the military may have access to credit union auto loans that traditional lenders don’t offer. For example, the Navy Federal Credit Union (NFCU) was established specifically to help members of the armed services access loans with affordable rates and terms military personnel could manage.
It’s worth checking with the NFCU and other lenders like the Pentagon Federal Credit Union to see what types of loans they offer. Because these organizations are used to working with military personnel, they are familiar with your special needs.
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4. Discounts on Cars for Military Members
Many automakers offer special pricing deals for military members. As you’re shopping for a new car, you may want to take these brands into consideration to help you save:
- General Motors
If you are stationed overseas, there may still be opportunities for you to purchase a vehicle at a discount. Volvo and BMW offer military benefits abroad. You may also consider services like Military Autosource, which can deliver a vehicle while you’re serving outside the country.
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5. Car Insurance Discounts
Monthly auto loan payments are not the only recurring expense related to car ownership. Keeping your car insured is another, and it can get pricey. Luckily, many insurance providers also offer car insurance discounts to active military members and veterans.
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Can You Get Out of a Car Loan with Military Orders?
If you receive military orders to move, you’ll still be on the hook for your car loan. That said, if you have leased a vehicle, you might be able to terminate the contract under certain circumstances prescribed by the SCRA. In order to break your lease, one of the following must be true:
- You must have entered into the lease agreement prior to active duty, and then you must have been called to active duty for 180 days or longer.
- During active duty, you received orders for a permanent change of station from inside the continental U.S. to outside the continental U.S. The same is true if you received an order to move from outside the continental U.S. to anywhere else.
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Explore Auto Loan Refinancing Options With Lantern
If your auto loan has become unmanageable, if interest rates have changed, or if your financial situation has improved, it may be time to look into auto refinancing rates.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Lantern by SoFi:
This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (www.nmlsconsumeraccess.org)
All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.
*Check your rate: To check the rates and terms you qualify for, Lantern and/or its network lenders conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.
Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Personal loan offers provided to customers on Lantern do not exceed 35.99% APR. An example of total amount paid on a personal loan of $10,000 for a term of 36 months at a rate of 10% would be equivalent to $11,616.12 over the 36 month life of the loan.
Student Loan Refinance:
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 05/01/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC. Click here to view our licenses.
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