There was a recent news story from Kelowna, BC regarding vehicle refinancing. A couple in Kelowna purchased a vehicle under a credit challenged program. Upon signing the paperwork for their vehicle, they were told that their loan would be rewritten with a lower interest rate in one year. After one year passed, the couple was not able to rewrite the loan and brought their story to the media.
This case brings up several helpful points about refinancing. First, the lending bank will not refinance a current loan at a lower rate. The loans terms and conditions do not change for the duration of the loan period. Second, the media report did not go in depth as to why the couple could not get further credit.
There are contributing factors that could affect a person’s ability to get credit, such as a change in household income or continued poor credit management. The age of the vehicle also can affect the loan as the older the vehicle is, the shorter the loan term or higher interest rate. Lastly, it could be that the time between the original loan and the attempt to obtain new credit was too brief.
It is important to remember that rebuilding credit takes time and work. Obtaining a loan is not the end—it is the beginning. It requires every payment to be made on time as per the signed agreement. Your personal history also plays a part, such as how long you live at your current address, how long you have worked at your current job or in the same industry. Vehicle selection also plays a part in rebuilding credit. You may have a limited choice of vehicles to start rebuilding your credit, and over time the selection and terms and rate will improve along with your credit.
The most important tip from this news story is to have a clear understanding of the terms and conditions of your loans. If you are planning to rebuild your credit with the purchase of a vehicle it is crucial to ask and learn what the overall strategy for rebuilding your credit will be.
Ask your financial consultant to review your credit with you. Refinancing can be possible, as well as trading in your vehicle for a newer vehicle however it is truly a case by case basis.