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Planning to refinance your car loan? You should be familiar with the concept of Power of Attorney.
Sometimes other people are more qualified to handle our personal affairs. That could refer to managing property or selling stocks. We can’t all be real estate managers or financial advisors.
As a result, you could give Power of Attorney to a trustworthy and reputable person to act on your behalf. This relieves the burden of making informed decisions about unfamiliar areas.
The same concept applies to the car refinance process. To process your new car loan, you’ll have to fill out a Power of Attorney form.
While “Power of Attorney” sounds like an intimidating term, it’s not as complicated as you might think.
What Is Power of Attorney?
Power of Attorney (POA) is a legal document that enables a person or entity to make decisions for you. This agreement establishes a principal and an agent. You would be the principal, and the agent is the person or entity assisting you.
But the attorney-in-fact does not need to be a lawyer. It could be a qualified family member, friend, or advisor.
Someone may use a POA to make a trusted and experienced advisor their agent. Then, the agent could manage the principal’s estate, finances, and medical decisions. For instance, let’s assume this person suffers from dementia and can’t manage their affairs. A POA enables the agent to act on this person’s behalf.
POAs provide resolutions to difficult situations, reducing future stress and financial hardship.
That said, POAs don’t need to tie to health care issues or have long-term implications. They can give someone else the ability to pay your bills while you’re away — or transfer your vehicle title.
The Different Types of Power of Attorney
If you’re seeking a car refinance loan, you’re most likely dealing with a limited POA (more on that in a second). But, for a more holistic perspective, we’ll walk through the various types of POAs.
There isn’t a one-size-fits-all POA. Why not? Because everyone’s personal situation is unique. One type of POA could be applicable for one person — but not another. In turn, there are several types of POA with different authority levels and conditions.
General Power of Attorney
A general POA appoints an agent to make general decisions for the principal. In most cases, general POAs are temporary. If you travel, you could use a general POA to enable an agent to handle your personal matters while you’re away. The agent might pay your bills, manage rental properties, file tax returns, etc. for a limited time.
Limited Power of Attorney
A limited POA only allows an agent to make decisions on your behalf in defined situations. This POA outlines specific directions for your agent during a set timeframe.
To refinance your auto loan, you’ll use a limited POA. It will allow the lender, broker, or agent’s power to transfer your car title.
Durable Power of Attorney
If an individual wants a POA to remain in effect if they ever become incapacitated, they’ll make sure their POA is durable. In other words, a durable POA allows your agent to continue making decisions for you even if you’re physically or mentally unable to.
Any POA can be durable — but it’s most commonly included in POAs for future planning.
Springing Power of Attorney
While durable POAs take effect immediately, springing POAs are tied to specific events or conditions. For example, you can decide to grant an agent authority to make decisions on your behalf only in the event you become incapacitated.
Regardless of type, always use specific and clear language. This reduces the possibility of misinterpretation.
Why do I need a Power of Attorney form to refinance my car loan?
Refinancing a car loan requires a lot of documentation. That includes a motor vehicle Power of Attorney. Well, you might be wondering why you need to grant someone else the ability to act on your behalf.
Why do you need to complete a POA for an auto loan refinance? A POA allows your lender or another relevant party to transfer your title and issue your new loan. It’s a necessary — and standard — step in the refinance process.
How to Grant Motor Vehicle Power of Attorney
So, you’re ready to fill out a motor vehicle Power of Attorney. You could need a few pieces of information first, including:
- Proof of insurance
- Certificate of title
- License plate number
- Driver’s license
- Vehicle identification number (VIN)
- Odometer reading
- Other documentation or vehicle information required by your state’s DMV
From there, you’ll select an agent that you trust to act on your behalf. In this case, you’ll use a limited POA so that the agent (your lender or broker) can handle your title transfer. This is a necessary step in the car refinance loan process.
Your last step is to sign the form in front of a notary. This could be a financial institution or a member of the American Association of Notaries. Once the POA is in place, you’ll be one step closer to receiving your car refinance loan.
If you’re using a POA to prepare for the future, it’s important that you can trust your attorney-in-fact. Only work with trustworthy and reputable individuals or entities. There’s a reason the word “power” is in “Power of Attorney.” It’s a big responsibility.
Although Powers of Attorney can have mixed uses, it’s a common document in the auto refinance space. Lenders and related entities need these forms to transfer your car title for you.