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Refinance Car

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    Check your eligibility with no impact on your credit score
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    See if you can save money by refinancing

Zuto is a credit broker, not a lender. Our rates start from 10.6% APR. The rate you are offered will depend on your individual circumstances. Representative Example: Borrowing £8,000 over 60 months with a representative APR of 20.9% the amount payable would be £208 a month, with a total cost of credit of £4,486 and a total amount payable of £12,486.

What is car refinancing?

Car refinancing refers to when you take out a new finance agreement to pay the outstanding amount left on your current loan under different terms. This can be helpful if your circumstances have changed since originally applying. In this article, we’ve explained whether you can refinance your car and why you might want to.

Can you refinance a car?

If you’re currently paying off a car loan, you might be able to refinance the agreement. This, essentially, allows you to reconfigure the structure and terms of the existing loan, usually to make repayments more affordable and convenient. We work with a wide panel of lenders across the country, to provide you with a pragmatic refinancing solution.

Whether your PCP loan is coming to an end and you’re thinking of refinancing the balloon payment on your car to spread out the final cost, or your circumstances have changed part-way through your hire purchase finance and you need to re-evaluate your spending, car refinancing can be a practical solution.

To find out if you can refinance your car loan, get in touch with our team today to discuss your existing agreement and next steps.

See how much you could borrow

Why refinance a car?

There are plenty of reasons why you might want to refinance a car, depending on a variety of factors including sudden changes to your finances or personal circumstances. We’ve outlined some of the main motivators:

  1. Reduce your interest rate: If your credit score has improved since first applying for car finance, you may be eligible for a loan with lower interest rates. Refinancing a car under new loan terms might mean paying less in interest and reducing the overall amount payable.
  2. Lower your monthly repayments: If you’re struggling to make your car finance repayments under the current terms of your loan agreement, refinancing could be a solution. Refinancing a car gives you the opportunity to change your current agreement for one with lower monthly payments over a longer period. If you choose to spread your loan over a longer period, though, be aware that additional interest may mean you end up paying more overall.
  3. Keep your car: If you have a PCP car finance agreement, you’ll be offered the opportunity to pay a balloon fee at the end of the term to own the car outright; otherwise, you’ll need to return the car to the dealership. Many drivers choose to refinance the balloon payment into manageable monthly instalments, so that they can own the car outright without having to pay the sum as a one-off cost. This will result in extending the overall loan period which will lead to higher overall cost including interest.

How to refinance a car loan?

There are several steps you can take to start the process of car loan refinancing. 

  1. Firstly, check in with your credit score. Companies such as Equifax, Experian and ClearScore provide it for free, and you can make sure you’ve got a score that will be attractive to lenders, with no outstanding issues.

  2. Next, research the lenders. You’ll want to compare the different interest rates, repayment terms, and fees that are out there.

  3. Compare this to your current deal. It may be easy to see the difference between a new deal and your old one, but there are online car finance calculators you can use as well.

  4. Get all the essential documents together. These can differ slightly depending on the lender, but generally include a proof of address, proof of income and employment, vehicle registration and driver’s licence.

  5. Submit your application. Zuto can help with all these stages, as we specialise in finding car finance and refinancing through our panel of lenders. We’ll take your circumstances into account and can get you a quote without impacting your credit score.

Refinancing your balloon payment

A balloon payment in regards to a car finance agreement refers to a lump sum that is due usually at the end of a PCP agreement. While this financing option often allows for lower monthly payments, it can also be a challenge for car owners when the balloon payment comes due. Usually you have 2 options - either return the car and no balloon payment is due, or you can pay the balloon payment and keep the car.

What is a balloon payment? Let’s say you get finance for a car worth £15,000, spread over three years:

  • The car is expected to be worth £8,000 at the end of the finance term.
  • That means it depreciates by £7,000, and that’s what you pay off with your monthly payments. 
  • At the end of the term, you can opt to make the balloon payment of the remaining £8,000 in order to keep the car.

Managing this final payment can be an issue, especially if your financial circumstances have changed since the start of the agreement. Refinancing the balloon payment is an option for individuals who wish to keep their car but find themselves unable to make the balloon payment in full. You might also just want to spread the cost further or you’d like some flexibility with payments.

By refinancing, you can potentially extend the payment term or secure more favourable terms, making the balloon payment more manageable. To explore this option further and learn more about refinancing balloon payments, visit our detailed Balloon Payments page.

Car refinance FAQs

Can I refinance if I have bad credit?

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Yes. Because we work with such a varied panel of lenders, you can often refinance your vehicle no matter your circumstances – even if you’re applying for car finance with bad credit. Contact our team to discuss your situation, and they’ll guide you through the best course of action.

Does refinancing a car loan impact your credit score?

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Applying for finance through Zuto doesn’t impact your credit score, as we only perform a soft search initially to assess your affordability. This gives you a good idea about whether you’ll be accepted for finance and how much you’re likely to be able to borrow.

Once you’re happy with your quote and ready to proceed, we’ll then conduct a hard search on your credit file. After a hard search, you may notice a slight drop on your credit score, but this is usually only temporary. However, if you’re refused car finance, multiple re-applications can then start to negatively affect your credit score.

How many times can you refinance a car?

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Technically, you can refinance your car as many times as you like, which can be useful as your circumstances change throughout your loan term. However, as previously highlighted, it’s important to consider the impact of too many finance applications on your credit score.

What if I am in negative equity?

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Negative equity happens when your car is worth less than the amount you still owe in loan repayments. Often, this is because the vehicle has depreciated more quickly than expected.

However, you can still refinance your car, even if it’s in negative equity, although the new agreement will be based on your outstanding amount rather than the vehicle’s value. Get in touch with our team to discuss your options, and we’ll find you the best solution among our varied panel of lenders.

If you’re considering refinancing your current car loan, check out our car finance calculator to get an idea of how much you may be able to borrow. Or, for even more useful advice, check out our range of helpful car finance aftercare guides.

Should I refinance my car?

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If your circumstances have changed - whether that’s your personal financial position or your credit score - it could be beneficial to refinance your car loan. You may be locked into a higher interest rate than you could be paying, so you could potentially reduce your monthly payments. Equally, if you want to keep your car but think you’ll struggle to make the balloon payment as a one-off cost, you can refinance that aspect of the finance too.

Why choose Zuto? See what our customers have to say