See Top Auto Loan Refinance Rates

How Car Loan Refinancing Works

1. Setting goals for the new loan, such as an improved auto loan refinance rate.
2. Researching online and brick-and-mortar lenders, including his current lender (refinancing car loans with the same lender is possible), and inquiring about possible terms.
3. Self-reporting information to preferred lenders to see what prequalifying auto refinance rates look like (if available).
4. Reading the fine print for preferred potential lenders to make sure all terms are clear.
5. Applying to refinance the car loan with a preferred lender.

When to Think About Refinancing a Car Loan

• Your credit score or debt-to-income ratio have greatly improved

• Car loan interest rates have dropped in general

• You realize your current loan is not right for you

• You’re ready to check rates and prequalify auto refinance shop online

• You have a subprime auto loan and want to explore refinancing car loans with a cosigner

• You need a lower monthly payment

Required Information for Refinancing a Car Loan

• Driver’s license
• Proof of residence (e.g., a utility bill)
• Income verification (e.g., a pay stub)

• Car registration details

• Your Social Security number

• Your credit score (via a credit check)

• Insurance documents

• 10-day payoff amount from the current lender

• Vehicle identification number (VIN)

• Limited power of attorney allowing vehicle title modification

• Evidence of consistent, up-to-date payments on your current loan

Tips for Comparing Car Loan Refinance Rates

• Get prequalified auto refinance offers online and shop around

• Compare rates across lenders to find the right refinance car loan for you

• Beware of any upfront fees and finance charges

Refinance Your Car Loan and Lower Your Monthly Payments

• Lower interest rates: If your financial and credit situations have significantly improved since you took out the original loan, you could qualify for a lower interest rate. As mentioned earlier, applicants with excellent credit and sufficient income may get approved for car refinance lowest rates.

• Budget-friendly monthly payments: Refinancing your loan may result in lower payments each month if you decide to extend your loan term. 

• Cash for other expenses: If you have positive equity (i.e., your car is worth more than your current loan amount), you may be able to borrow against that equity with cash-out auto refinancing. This means you can take out more than what you currently owe on your car and use that additional loan money to pay for other expenses.

• Lowering your credit score: A lender may pull a hard credit check before making an official auto loan refinancing offer. The hard credit check may hurt your credit score whether or not you accept an offer. Your credit score may take a slight hit even if you get approved for car loan refinance best rates.

• Paying more in the long run: While monthly payments may be more budget-friendly in the short term, refinancing a car may entail a longer loan term. As a result, lower monthly payments can result in paying more in interest over the life of the loan.

• Possible DTI impact: Cash-out auto refinancing increases your debt burden, which can negatively impact your DTI and make it harder for you to qualify for other lending products.

Reasons refinancing your car loan could be a good idea