It might sound like an impossible task, but some people might want to transfer their auto loan to another credit provider. The reasons for even being interested in such a thing could be many and depend highly on your personal situation.
Transferring a car loan in Hamilton or anywhere else in Canada isn’t necessarily a simple process. You need to know what the process possibly involves, as well as the different things to consider before going through with such a financial move. It definitely isn’t for everyone, so rushing into this decision is not a good idea by any means.
Don’t let the potential difficulty of transferring your car loan in Hamilton scare you. While it might take some work and planning, the energy you put into the process is well worth it in the end.
Any form of refinancing a loan has the potential to save you a serious amount of cash. Cars aren’t exactly cheap, so you’re working with a big chunk of capital or what you owe for the actual car. If you interest rate is high, that can cause you to pay too much each month and over the life of the loan, siphoning money away from something like a retirement account, shrinking other debts, or other worthwhile causes.
This is important to keep in mind as you work on transferring your car loan from Hamilton or anywhere else to another credit provider. Remember it’s to get you in a better financial situation so you can achieve whatever worthwhile goals you have.
That thought will help sustain your efforts through what can be a somewhat difficult and challenging set of tasks.
Reasons to Transfer Your Car Loan
While there are perhaps more good reasons to transfer a car loan in Hamilton from one lender to another, considering some apply to specific cases, some general scenarios are usually ideal situations for the switch.
If you’re in any of the following situations, you’re probably headed in the right direction by considering a switch in your car loan financing. Even if you don’t line up with these scenarios, the switch could be a good thing to go after, so don’t get discouraged.
An Improved Credit Score
Hopefully you’ve been keeping your eye on your credit file and score. There are quite a few services, some which cost and some which are free, that allow you to track changes. It’s a practical way to know how you’re doing when trying to establish, build, or rebuild your credit.
If you notice that your credit has recently improved dramatically, or even that it has steadily crept to a significantly higher score than when you financed your car, looking for a new credit provider could yield some great results.
When you apply for a loan, the creditor will pull your credit file and look at your score. If there are problems or your score is below a certain number, you could either be rejected for financing or get an offer with a higher interest rate. That’s certainly not idea, but when you need a car to get around, you might feel that you have few choices.
As you pay that car loan in Hamilton on time and maybe do some other things to build positive credit, like using a credit card or other revolving line of credit responsibly, your credit score continues to increase. That higher score could mean you’re able to get a much lower interest rate on a loan.
The interest rate is basically an expression of how confident a lender is that you will repay the money you borrowed, plus interest, on time. A high interest rate indicates you’re a risk for not repaying a portion of the loan, while a low interest rate means you’re viewed as a very good risk.
With a lower interest rate you’re paying less money for the same car over the exact same period of time. In other words, it really pays to maintain good credit by paying bills on time. By switching to a new credit provider, you could begin to enjoy the benefits of your improved credit score.
Too Many Fees
Some lenders are really big on charging fees for all kinds of things. While your monthly car payment might be fairly reasonable, having to pay fees for things like processing your payment is something that will add up over time. The effect is that you’re essentially paying more each month for your car, without any of that additional money going toward paying it off sooner. It’s like the interest rate is just a little bit higher.
Not only that, always being hit with fees certainly doesn’t make you feel like a valued customer. Pretty much anyone would get tired of that situation in a hurry, so if you’re itching to find a better way to pay your car loan, switching to a new lender is a solid plan.
Sharing the Burden
There’s another good reason to consider switching who finances your car loan in Hamilton. If you originally needed a cosigner and that’s no longer a necessary thing, it’s a nice gesture to let that person out of the potential obligation as early as possible.
When you transfer a car loan to another lender, that’s a great time to switch who’s on the loan. If your credit situation and finances have improved to the point that you can qualify for the loan at a good interest rate all by yourself, having a cosigner is obviously unnecessary. The other person no longer has that debt amount showing on their credit, allowing them to move forward with their own financial plans for the future without that obligation potentially weighing them down.
On the other hand, you might find that you need or want to add someone else to the loan. Perhaps you have gotten married or just want extra help paying for the car loan, and that means you need to add someone else as a cosigner. That other person might have much better credit than you, which would help lower the interest rate, saving money on the payments.
Look at Your Old Contract
It’s a good idea to hold onto your financial documents, especially something like your car loan contract. The details of your financing are contained in it, so you want to track this document down if possible
The contract will tell you for sure the interest rate and term of your car loan. It also will have details about whether or not there’s a prepayment penalty. That means if you have to pay a fee for paying off the car early or switching the financing to another lender. Sometimes that fee is small and other times it’s large. Many loans don’t have such a fee, or it only applies for the first year of the loan. Instead of worrying about it, the best thing to do is look up the contract and find out for sure.
If you can’t find your loan contract, not all is lost. The lender can supply the same information, so call the customer service line.
Determining Your Car’s Value
It’s a good idea to look up your car’s value before going through with a loan transfer. That’s true despite the fact that most creditors will use a loan value for the transfer process.
Use something like Canadian Black Book to look up the retail and trade-in values of your car. You’ll need basic information about your car, like the mileage, year, make, model, options, and its overall condition. The website will walk you through the process, which is fairly simple, especially if you read the descriptions for determining your car’s condition.
Shopping For Financing
Just like with getting an initial car loan in Hamilton or elsewhere, you will need to shop around if you want to transfer your loan to a different creditor. There are different options, each with its advantages and drawbacks. The more hunting you do, the better chance you have of getting the right loan for your situation.
While the actual process of applying for the loan transfer isn’t a big deal, hunting for a good financing situation is where the effort might become tiresome. If you have great credit and a newer car, finding a good fit is actually fairly easy. But, if you still have some challenges on your credit history or your car isn’t just a few years old, lining up a new lender can prove to be quite challenging. If you have an older car and your credit is still dinged up, expect the hunt to require some considerable time as well as patience. Just remember to not give up, because you have financial goals which will benefit from pushing forward and finding a new credit provider.
Of course, you can check with local banks and credit unions to see how they handle car loan transfers. Each one has its own policies and qualifications, so it’s wise to find out what they are well in advance to moving forward. Be sure to talk to the institution where you bank, because you might get a special deal since you’re a known quantity. Sometimes that can even be the difference between an approval and rejection on the application.
Don’t forget there are some other sources for financing, and many of those do loan transfers. For example, auto loan brokers might run special programs for your situation.
As is the case with any loan, you must go through a thorough application process before you can be qualified officially for a car loan transfer to the new lender. This helps ensure you are truly in a position to fulfill the terms of the new loan, and to help the creditor feel comfortable with your willingness to make payments on time. What this process does is protects against fraud and bad investments by the financial institution, since ultimately it needs to make money to stay in business.
You will need to fill out an application, either online or in person on paper. That application will ask for basic information like your name, address, and who your employer is, as well as your position at work and how long you’ve been there. You also must supply the names and addresses of nearby relatives.
For the process, you must consent to the lender pulling your credit file. This means the various items in your credit history will be on full display, including late and missed payments, collections, bankruptcies, and all your active credit lines at the moment. Of course, what will be most troubling is if you’ve had problems paying for your car on time in the past, or even worse had one repossessed fairly recently. Lenders take this kind of information seriously since it’s often a predictor of how you’ll do with paying on the loan, should they choose to move ahead with the transfer.
The smart thing to do is apply for financing with multiple lenders at the same time. This speeds up the process of securing new financing for your car, plus it allows you to compare offers at the same time, so you know you’re getting the best deal possible.
After you’re approved for the car loan transfer, you still need to sign the official paperwork, just like when you first bought the car. This isn’t a process you should just gloss over since it has serious implications for your finances.
Read over everything carefully. If you have other offers, read those through thoroughly and compare them. Run numbers instead of just assuming you know which situation makes the most financial sense.
Ultimately this process will help you get into a better, more secure financial situation.