Consumers are refinancing their auto loans amid low interest rates and stressed economic conditions.
Denver, Colo.-based auto refinance fintech RefiJet is experiencing a spike in applications during the COVID-19 pandemic, logging a 36% increase in applications since March, Chief Executive Reid Rubenstein told Auto Finance News.
“It really came to the forefront, people needing to refinance to lower their rate,” Rubenstein said. “Applications nationwide in [the refinance] space shot up,” he said, adding that the company has grown by 300% since its 2016 launch.
RefiJet facilitates between 1,500 and 1,800 loans per month, and expects to see that number jump to 2,500 loans by the fourth quarter, Rubenstein noted. The refinance company typically facilitates loans ranging from $7,500 to $150,000, with the average at $27,000, he added.
Applications are processed online and by phone for customers looking to lower their monthly payment, and who may qualify for a better interest rate on a car loan, Rubenstein said. The company works with a few dozen financial institutions to pair customers with refinance options, he said, without naming specific lenders. Customers then choose the loan that will work best for them.
RefiJet handles the marketing, loan facilitation and underwriting for the loan to the lender’s guidelines, and the lenders service the loans once approved, Rubenstein said. “We do everything. All the lender has to do is accept applications,” he added.
While RefiJet’s financing process is digital, the company also employs a staff of financial experts to guide customers through documentation and the process as needed, Rubenstein noted.
RefiJet isn’t the only digital refinance company to see success during the pandemic. Gravity Lending, an Austin-based fintech that connects consumers with auto refinance loan providers, experienced a 400% month-to-month increase in July 2020 to $16 million in originations.
“The lender world has come to realize the value of … opening themselves up to acquiring assets in additional channels to their indirect model,” Rubenstein noted.
The current low interest rates may also entice customers to purchase a new car rather than refinance their current loan, Jonathan Smoke, chief economist at Cox Automotive, told AFN. “Rates are not likely to get lower, and those with the most to gain and the ability to do so may have already acted in 2020,” he noted.
“If supply improves in 2021 to support more sales, we may see more new purchases capitalizing on persistent low rates as opposed to current loan holders seeking to refinance existing loans,” Smoke said.
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