Car Loan Refinance Explained: How to Lower Your EMI Legally

Having your own car brings freedom and convenience, but it also involves a financial commitment through a car loan, which can sometimes become a burden on your monthly budget. Thankfully, there is a smart and legal way to lower your EMIs and refinance your vehicle loan. This process involves transferring an existing loan to a new lender that offers relatively low interest rates and a longer repayment period. 

In this article, we’ll understand what a refinance of a loan for an auto is, the benefits of refinancing, and discuss the tips for getting the best deals.

What is Auto Loan Refinance? 

Car or auto loan refinancing is a process where the user replaces their existing loan with a new one, typically obtained from a different lender for better terms, interest rates, and tenure. People opt for refinancing not only to secure better terms but also to lower their monthly payments and ease their financial burden.

The process of refinancing is quite straightforward, as you can apply for a new loan to your preferred lender, follow the process and if approved, the lender will pay off your current car loan, and you’ll pay off the same with EMIs under revised terms. 

Benefits of Car Loan Refinancing

Let’s understand why people consider refinancing their loans: 

• Lower EMI: One of the most common reasons for refinancing a vehicle loan is to reduce your monthly payments, which can be achieved by negotiating for a lower interest rate or extending the repayment period.

• Reduced Interest: You can qualify for refinancing significantly if the market interest rate has dropped or if your credit score has improved. This will potentially lead to a loan at a lower interest rate and save you time. 

• Improved Cash Flow: Lower EMIs will significantly increase your budget, and you can focus on your other goals.

• Repayment Tenure: Many lenders allow borrowers to choose their repayment period, offering you more control over your payments. 

When to Consider Refinancing Your Car Loan?

Here are several situations where you can consider refinancing your car loan:

• The interest rate on the loan has been lowered since you took out the original loan.

• Your CIBIL score has increased, making you eligible for better terms and conditions.

• You want to reduce your monthly payments due to some financial problems.

• You are facing problems with your current lender and want to switch to a provider offering better services and benefits.

Steps to Apply for Refinancing of a Car Loan

Follow these steps to apply for an auto loan refinancing:

• Analyse your current outstanding balance, EMI and interest rate.

• Visit your preferred lender’s website or download the app from trusted sources.

• Use an online calculator to work out your savings after refinancing. 

• Navigate to the required section, complete the application form, and download the necessary documents.

• Once your loan is approved, the new lender will pay off your existing balance, and you can then repay the loan under the new terms. 

Tips to Get a Better Refinancing Deal

To maximise the benefits of your car loan refinance deal, keep these tips in mind: 

• Check your credit score, as a higher score helps you negotiate a loan at lower interest rates. 

• Don’t settle for the first offer you see; compare your options and choose the best one.

• Read all the terms and conditions, paying special attention to hidden charges, including processing fees, prepayment penalties, platform fees, and more.

• Negotiate more favourable terms with the lender after improving your financial profile.

Conclusion

If your current loan is financially draining you, then refinancing is a good option. Trusted platforms like Bajaj Finserv, which offer a user-friendly, one-stop, and secure website, provide car loan refinancing with no hidden fees, an immediate process, doorstep assistance, and flexible tenure. 

So, explore your options today, follow the above tips and choose a better loan option to pay your debts hassle-free.