Will An Auto Loan Refinance Boost My Credit?

When you’re trying to find ways to boost your credit, you might consider refinancing some of your debts to consolidate them or get better rates. This can be a good choice if you have a lot of high-interest rates that are keeping payments and balances high, or if you’re just looking for a cheaper car payment and know you have better credit than when you originally took the loan. 

But what will this loan do to your credit? Initially, as with all new lines of credit or loans, your credit score will likely drop by at least a few points. However, if you have gotten a lower payment, have reduced your debt-to-income ratio, or otherwise improved your financial situation, it could improve your credit over time. 

How Does Auto Loan Refinancing Work?

To get a refinancing loan, you simply need to start searching for lenders that offer this option. It’s not something that you can get just anywhere, so it’s best to work with experienced lenders who know the refinancing world better. You can compare the rates and terms you have to choose from so that you get the best option, then simply apply for the loan and wait for approval. 

The good news is that you can usually get much faster quotes and approvals online than you did in the past when everything was done on paper and over the phone. Once the refinancing loan is approved, here’s what happens. 

  • Your new lender will send your old lender a check for the balance of the loan.
  • That loan will be considered paid and the new lender will assume ownership of the lien on your vehicle.
  • You will be issued new monthly payment amounts and dates based on the terms of your loan.
  • New payments will start based on the loan terms agreed upon.
  • Within 30-60 days, the new refinancing loan should appear on your credit report.


Save Money and Support the Long-Term

If you’re looking for a quick fix for your credit, this isn’t it. However, if you want to improve your credit profile (and your financial situation) over the long term, this is a great option. The temporary hit to your credit will fade and as long as you’re paying the new loan on time, your credit will eventually start to rise. Refinancing can be a great way to improve your car loan situation in several aspects, and can eventually help your credit, too. Contact FinleyFi Solutions to learn more!

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