MAY 05, 2022
Before doing so, it’s helpful to know how much you’ll be able to borrow, while getting ahead of the game with your paperwork. Below, we look at how pre-approval for auto refinance will do exactly that, along with details on how to improve your chances for pre-approval and the things you’ll need to be successful in an application.
Before getting started with auto loan refinance pre-approval, make sure you understand what auto refinancing is and the related details. There are plenty of reasons to look at refinancing your vehicle, but it can be tricky – and if you want to shop around, it can be time consuming.
Getting pre-approval requires various details about your financial situation and creditworthiness, pulling together a succinct review of your credentials to determine your eligibility and terms. The result? If all goes well, you’ll have approval for an auto refinance loan and won’t need to undergo further credit checks.
If you are approved, there will be a set amount of time that this pre-approval is valid for depending on the lender (often up to 30 days). Remember: pre-approval means a lender has offered you a specific rate, while pre-qualification is the process that simply provides information on whether you’re likely to receive a loan at a specific rate.
While the pre-qualification will require a check of your credit score, it won’t negatively affect your score like finalizing a loan application would. With Caribou, you can get started by entering your personal, vehicle, residence, and employment information into the pre-qualification form.
Pre-approval for refinancing your car is also different from auto loan pre-approval when you are car shopping. When you are shopping for a vehicle, you can be pre-approved for the loan amount ahead of time. You won’t need to input the details of the specific vehicle you want since you are actively looking at many car options.
This allows you to shop around after you’re pre-qualified, with a better idea of how much you’ll be able to receive – and with more bargaining power to boot. When you are refinancing your vehicle, you already have the vehicle. To pre-qualify for refinancing, lenders need the refinanced vehicle information so they can accurately provide refinance rates and quotes.
It is important to take care of your credit and creditworthiness. This includes lowering the frequency of lenders checking your credit history. For example, applying for auto refinance pre-approval through a marketplace helps to limit the number of checks on your score while you are shopping for rates. This allows you to see many rate offerings from the single pre-qualification check. It’s also helpful to keep in mind what makes a good credit score.
A credit score is based on your borrowing history. It is calculated by digging into the number of loans you’ve had and how you’ve repaid them. The score gives lenders a better idea of your ability to pay off loans. This can include the number of open bank accounts to your name, your total levels of debt, and overall repayment history. From this comes your credit score: a number that depicts your creditworthiness.
The most widely used metric in the US for credit scores is the FICO Score, based on metrics developed by Fair Isaac Corporation. This calculation is made up of five varying factors: payment history (35%); amount owed (30%); length of credit history (15%); credit mix (10%); and new credit (10%).
When it comes to refinance car loans, lenders will set a minimum threshold for a credit score. They will use scores above this threshold to determine adjustments to your personal terms; things like interest rate, maximum loan term and maximum loan amount.
There are plenty of benefits to pre-approval, which is why it’s becoming an increasingly popular avenue to look at available refinancing options. Doing so will demonstrate to lenders that you are a trustworthy and capable borrower. This in turn is likely to lower the interest rate of your refinancing loan, as well as the duration or length of the term.
The higher your credit score, the better refinance offers you are likely to get. Some lenders require minimum credit scores of above 600, while some may be higher. The lower your creditworthiness, the more limited your options may be. But with pre-approval, you’re given the comfort and security of knowing what you can afford to start budgeting around your new car payment.
Collecting the sort of information you’re likely to need for pre-qualification will mean you can organize now and move through the auto refinancing application quickly when the time comes. There will be some information that’s mandatory, while other details will vary based on what lenders require to make a funding decision.
For example, the absolute minimum requirements will be things like your employment information, your personal details (name, address, date of birth), your salary, and details of any outstanding debt. Additional info you might also be asked to provide are details like co-borrower information and your social security number – which is needed for loan finalization but usually not pre-approval.
Filling out the details for auto refinancing is simple and straightforward. Enter the above details along with your paychecks, identification cards, and tax and credit documents. You are fast tracking your way toward auto refinancing your ride!
What does the process for auto refinance pre-approval look like? If you have the documents and information mentioned above, the process should be fairly simple. Once you’ve submitted your personal and vehicle information, a ‘soft’ credit pull is used to check your loan history and information. This type of pull checks your credit history without impacting your credit score.
Once you’ve completed these pre-qualification steps, you’ll see the available auto loan refinance rates from individual lenders who can serve your credit score. Then the decision is in your hands to select a loan option.
If you are wondering how long this all takes, there’s good news! The whole process of getting pre-qualified can be relatively fast with an automated platform like Caribou. In fact, we are able to pre-qualify you for refinancing in minutes if you’ve provided all the correct details. Our system connects with credit reporting services automatically, so once you’ve submitted your application, you can sit back and wait for your pre-qualification details.
Again, it is important to remember that pre-qualified and pre-approved aren’t the same thing. With the details you’ve provided, our automated platform tells you if you would qualify or not, based on your details. The next stage is pre-approval, in which you select a loan option and are making a conditional commitment to the loan.
Generally, extending a new line of credit, like a loan or credit card application, will require a hard inquiry on your credit history. These pulls remain on your credit report for two years. However, a soft inquiry – or ‘pull’ – can be undertaken to check your credit report, without submitting a loan application.
A soft pull signals only that your credit history is being reviewed and is a preliminary step in the auto refinancing process. In contrast, a hard pull indicates that you are actively applying for a line of credit – which is one of the last steps in the refinance process.
If you are shopping around, you usually do not need to be concerned about a soft pull impacting your credit score. The best practice is to keep all inquiries and pre-qualification applications within a shorter time frame. For example, Experian notes that grouped credit inquiries are treated as a single episode of loan shopping when they occur across a short timeframe, like several weeks.
Credit bureaus and FICO understand you are likely to have multiple credit inquiries on your report in this instance, which is why multiple inquiries for the same type of credit are considered as a single inquiry if they occur within a specific time span.
Auto loan refinance pre-approval is a great way to give yourself peace of mind when looking to refinance your vehicle. And with Caribou, you’ll have the opportunity to check out whether your details will pre-qualify you for refinancing with our quick and easy process. Once pre-approved, you can select from available rates, choose a lender which works well for you, and take the final steps towards auto loan refinancing.
* Refinance savings may result from a lower interest rate, longer term, or both. There is no guarantee of savings. Your actual savings, if any, may vary based on interest rates, the repayment term, the amount financed, and other factors.
+ To check the refinance rates and terms you qualify for, we conduct a soft credit pull that will not affect your credit score. However, if you choose a loan product and continue your application, we or one of our lending partners 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.
++ Social security number is required should you choose to move forward in the loan application process.
** APR is the Annual Percentage Rate. Your actual APR may be different. Your APR is based on multiple factors including your credit profile and the loan to value of the vehicle. Advertised 1.99% APR is based on a representative example of refinancing a 2021 or newer vehicle with mileage of less than 85,000 miles and a FICO score higher than 740. Lowest Rate not available in CA, ME, MD, MS, NE, NV, PA, WV, WI and VT. Not all borrowers will receive the lowest rate. All applications are subject to verification of employment. We do not guarantee that you will receive any loan offers or that your loan application will be approved. If approved, your actual rate will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Insurance savings will not result from lower APR.
Terms and Conditions apply. Caribou reserves the right to modify or discontinue products and benefits at any time without notice. Participating lenders, rates and terms are also subject to change at any time without notice. The information you provide to us is an inquiry to determine whether our lenders can make you a loan offer. If any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. We do not guarantee that you will receive any loan offers or that your loan application will be approved. If approved, your actual rate will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors.
Insurance products offered through Bindable and Caribou Insurance Services, LLC. Caribou is working with Bindable who owns MyLifeProtected and MassDrive Insurance Group, LLC, the licensed agent for all products.