If you’re unhappy with your current loan’s interest rate or monthly payment, then refinancing your auto loan might be a viable option.
It could be a smart move if interest rates have dropped. It may also be a good idea if your credit has improved, or you didn’t explore all your loan options the first time around.
Here are our top picks for the best auto refinance companies, along with some tips on how to get the best loan possible.
10 Best Auto Refinance Companies
Auto Credit Express
- Minimum credit score: 500
- Loan term: Up to 72 months
- A+ BBB rating
- Minimum credit score: 500
- Loan amount: $12,000 – $100,000
- Quick application
Consumers Credit Union
- Minimum credit score: 620
- Loan term: Up to 84 months
- No minimum loan amount, max is $600,000
- Minimum credit score: 510
- Loan amount: $9,000 – $60,000
- Get a personalized rate in minutes
- Minimum credit score: 575
- Loan term: 24 – 84 months
- A+ BBB rating
- Minimum credit score: 650
- Max loan amount: $150,000
- Loan term: 24 to 80 months
- Minimum credit score: none
- Loan term: 24-84 months
- Loan amount: $2,500 – $100,000
- Minimum credit score: none
- Loan amount: $5,000 – $55,000
- Lower car payment by $86 per month on average
PenFed Credit Union
- Minimum credit score: none
- Loan term: 24 – 72 months
- Loan amount: $500 – $100,000
- Minimum credit score: none
- Loan term: 12 – 84 months
- Loan amount: $5,000 – $100,000
What to Look for in an Auto Refinance Lender
When it comes to comparing offers from auto refinance lenders, including your bank, credit union or any online lender, it’s important to keep all the details in focus. Finding the best auto refinance loans requires evaluating both the monthly payments and the overall cost of the loan.
In addition, you’ll also want to figure out your priorities and needs when it comes to things like fees, transparency, and customer service. Getting clear on your expectations here will make it easier to compare offers, and help you refinance your auto loan with confidence.
Annual Percentage Rate
The primary factor to consider when searching for any loan is the APR, or annual percentage rate. This indicates the amount of interest, and total value, you’ll have to pay back on your loan.
Refinancing your auto loan with a lower rate than your current auto loan is the goal here, so it’s important to take the time to find the lowest rate possible.
Fees & Penalties
Always consider the APR in conjunction with the fees for any loan. Even if the interest rate offered is attractive, some lenders will have fees and penalties that will outweigh the initial benefit of a low rate, and make auto refinancing pricier than necessary.
Some fees are common, such as origination fees, but make sure to read the fine print with every loan offer don’t be afraid to negotiate or ask questions about fees or penalties on a new car loan.
Many of the best auto refinance companies will offer flexible loan repayment terms. Most loan terms range from 24 to 84 months. It’s important to get your budget at least outlined before you shop for lenders because you’ll want to have an idea of how long you’d like to take to pay off your loan.
Remember that the longer you extend your loan term, the harder it will be to qualify for the best interest rates available. Extending your loan payments over a longer period of time will result in lower monthly payments, but you’ll pay more in interest over the course of the loan. A shorter loan term usually means access to the lowest rates.
Look out for lenders who might offer discounts on a new auto loan, as this could help you make significant savings. For example, many auto loan refinance lenders will offer an improved interest rate if you sign up for automatic monthly payments. Other financial institutions, such as big banks, often offer discounts for signing up for other banking and financial products, such as checking or savings accounts.
When looking to improve on your current loan, it’s important to look for reputable lenders. A reputable company will be honest and upfront about their fees, terms and conditions, as well as any potential penalties if you fall behind on payments.
Checking out customer reviews is a great way to evaluate quality, as well as making sure any lender has a good rating with the Better Business Bureau.
How to Refinance a Car Loan
Check Your Credit Score
Before applying with a lender, check your credit score to see where you stand. Don’t overlook this pertinent step since your credit score plays a major role in whether your application is approved.
Grab a free copy of your credit report from each of the three major credit bureaus. Evaluate each section to ensure the information is accurate. If you spot any errors or issues, file disputes promptly to have them rectified.
You want to give yourself the best possible chance of getting your application for refinancing approved. So, you can’t afford to have errors on your credit reports dragging your credit scores down.
While 90% of auto refinance lenders use FICO scores to evaluate creditworthiness, their algorithms vary across the board. So, your concern should be with what’s in your credit report since that’s where your credit score is derived from.
You may be able to refinance your car loan through local financial institutions, like a national bank or local credit union. However, in addition to banks and credit unions, there are scores of online lenders and online loan marketplaces that may be worth considering.
This will help you determine which auto refinance companies offer the best auto loan refinance rates and narrow down your options. Most importantly, you may determine that refinancing may not be a good fit if the interest rates are the same or higher.
Most auto refinance companies have minimum and maximum loan amount requirements. Make sure the loan amount that you want to refinance falls within those requirements.
Word of caution: You may be able to secure a lower monthly payment with the same or a slightly lower interest rate. However, it may end up costing you a lot more in interest in the long run. More on this shortly.
Auto loan refinancing lenders will need to verify key information on your loan application to approve you for refinancing. Therefore, it’s a good idea to reach out to the lender beforehand to confirm what they’ll need. This typically includes:
- Copy of driver’s license
- Vehicle identification number
- Copy of most recent pay stub (federal tax returns from the past two-years may be required if you’re self-employed)
- Purchase agreement from the initial purchase (or lease agreement)
- Registration documents
Doing so will help streamline the process, as you’ll be prepared when the time comes to apply.
Worried about your credit scores taking a hit if you apply with multiple lenders? Don’t be. Multiple loan applications will only be counted as a single inquiry if submitted within a 30-day window. Your credit score will take a small hit, but it beats multiple inquiries at once.
Conduct a Cost-Benefit Analysis
Once you have received approval for the auto refinance loan, it’s time to analyze the numbers to determine if refinancing will benefit you. You can do so by entering the numbers into an auto loan refinance calculator.
Also, check to see if your current lender charges a prepayment penalty for paying your car loan off early and remember to factor that in.
Here are a couple of scenarios to illustrate:
Let’s say your monthly auto loan payments are $684, and the remaining loan balance is $30,000. This amount is set to be paid off in four years.
If your current interest rate is 8.5%, and you qualify for a lower rate of 4.5% with a four-year loan term, you will lower your monthly payment by $57 each month. Plus, you will save $2,683 over the life of the loan. In this case, it makes sense to refinance.
Let’s say your monthly car payment is $375, and you have $10,000 left on the original loan, which you will pay over the next three years. If your current loan rate is 6% and the lender agrees to lower the rate to 5%, but with a six-year loan term, your monthly payment will drop to $242.
However, you will pay $3,893 more in interest due to the extended loan terms. In this case, it wouldn’t be wise to refinance your auto loan unless you were desperate for a lower monthly payment.
Make sure to check with your lender to see if your current loan has prepayment penalties. If it does, depending on how much the prepayment penalty is, it might not be worth refinancing your auto loan.
Review the Final Loan Documents
Before signing on the dotted line, go over the refinance loan documents in their entirety. If there’s any verbiage or terms that seem strange or unfamiliar, seek clarity to avoid confusion later on down the line.
Once you approve and sign, the auto loan refinance lender will send detailed instructions to wrap up the process. Then, moving forward, you will deal with the new lender to make payments and address any questions or issues with your auto loan.
What is auto loan refinancing?
Auto loan refinancing is when you replace your existing car loan with a new one to avail of a better interest rate, more favorable loan terms or an otherwise more manageable loan in general. Loan refinancing can usually be done anywhere you would find regular auto loans, such as dealerships, banks, or credit unions.
If you’re unhappy with your current car loan, or if your financial circumstances have changed, refinancing your existing loan might be a good way for you to move forward. As long as you don’t have negative equity in your car, you should be able to find a lender who can give you a new loan with a different interest rate and new terms.
Who are the best auto loan refinance lenders?
Finding the best auto refinance lender depends on your situation and what their current interest rates are. Auto loan refinancing lenders change interest rates quite frequently, so the bank or credit union offering the best interest rates right now may not have the best rates tomorrow.
When choosing an auto refinance company, it’s important to compare auto loan refinance rates. If you find several lenders with similar rates, look into what else they have to offer.
Is refinancing a car worth it?
Many people wonder if auto refinancing is even worth it. It certainly can be, if you do it right. With the right lender, it can be a quick and easy process. You can pay less interest over time, and lower your monthly car payments.
When should I refinance my car loan?
There are various situations in which you may consider refinancing your current auto loan. Here’s a rundown of the most common reasons to see if an auto loan refinancing could be a smart choice for you.
- When interest rates are lower than when you took out your car loan.
- You’ve improved your credit and could qualify you for a better rate.
- You want to refinance a car lease into a purchase loan.
- You want to lower your monthly payments by extending the loan term. It could result in more money paid in interest but can help keep you current on the auto loan.
When should I not refinance my car loan?
If the interest rate you qualify for today is higher than your current loan rate, it’s probably not the best time to refinance.
Does refinancing a car hurt your credit?
Refinancing your auto loan could temporarily lower your credit score by a few points, but it’s unlikely to hurt your credit history in the long run. If you can save money and lower your payment, it’s likely worth the few points that your credit score will temporarily drop.
If you make your payments on time every month, you should see an increase in your credit score.
How soon can you refinance an auto loan?
You can refinance your auto loan as soon as you find a lender that is willing to give you a new auto loan. Some lenders won’t refinance an auto loan until it has been open for at least six months or more. Other lenders have no set waiting period, so it all depends on the lender.
How many times can you refinance a car?
There is no legal limit on the number of times you can refinance a car loan. As long as you can find a lender who will refinance your car loan, you can do it as many times as you want.
What happens when you refinance a car loan?
Refinancing an auto loan is simply paying off your current auto loan with a new one. The new lender will pay off the original loan with your previous lender, and then you will begin making your payments to them.
Can you refinance a car loan with bad credit?
It is possible to refinance your car loan with a bad credit score, and some lenders will specifically market their products to those with poor credit by offering loans with low minimum credit score requirements.
That being said, refinancing your auto loan with bad credit can be difficult, especially if your credit score has not improved since taking on your original loan.
Those with lower credit scores will have to take on higher interest rates, as lenders will view them as more of a risk. If your credit score is bad and you want to refinance, be sure to look for reputable lenders who specialize in bad credit auto loans.
What is the minimum credit score requirement for auto refinancing?
The lowest minimum credit score requirements for most auto loans are around 500. Lenders take many details into account when considering loan applications, however, and every situation is unique.
You may still find a reputable loan company who will lend if your score is lower than this, but as a baseline most lenders don’t go below 500.
What if your application for refinancing is denied?
Take a breather because it’s not the end of the world. In fact, it’s the perfect opportunity to return to the drawing board and figure out what’s dragging your credit score down.
The lender should be able to provide you with insight on why your application was denied. This will serve as a starting point to make improvements and try again. But if you don’t know where to start, take a look at our ultimate guide on how to repair your credit.
Can you get money back when you refinance an auto loan?
If you have equity in your car, a cash-out refinance is definitely possible with the right lender.
Can you refinance your auto loan with your existing lender?
If your current lender offers auto loan refinancing, then it’s possible for them to refinance your current auto loan. In fact, it may even be easier to work with them than it would be a new lender.
What is required to refinance a car loan?
Each auto lender has different requirements when it comes to refinancing an auto loan. You will typically need:
- proof of employment and income
- proof of residence
- vehicle information
- proof of insurance
You will also need to be current with your payments and not upside down your loan. Some auto refinance companies also require that your car is not over a certain age.
Can I refinance if I owe more than my car is worth?
It will be more difficult to find a lender if you are upside-down on your auto loan. However, it’s probably in your best interest to find someone who will and refinance it as soon as possible so that you can turn that situation around.
Which companies offer the best auto refinance loans?
Finding the best auto refinance loan for you will depend entirely on your needs, financial situation and your credit history. The better your credit score is, and the stronger your credit history, the more options you will have in terms of lenders, interest rates and loan terms.
Today most banks and credit unions offer auto refinancing. It is always a good idea to start with your current bank or credit union when shopping for a new loan, as many will offer improved rates to their customers.
Finding the best refinancing auto loans today usually requires comparing rates and offers from online loan marketplaces, too. This is done by applying for quotes online through multiple lenders and using those to negotiate your rates.
Applying with multiple lenders and comparing all your offers will give you the strongest chance of finding a low-rate loan that ticks all your boxes.
There are also online marketplaces that work with a network of refinancing lenders. This makes it easy to apply to many lenders with one loan application, but it does mean you can end up on the receiving end of calls, texts, and emails from multiple lenders.
How can I tell if an auto loan lender is legitimate?
Unfortunately, financial products such as auto loans are often targets for scammers and bad actors with poor business practices. The easiest way to ensure an auto loan lender is legitimate is to check for their credentials.
A reputable bank or will clearly display the “Member FDIC” stamp on its website to indicate that the lender is backed by the Federal Deposit Insurance Corporation.
If you’re looking at loan options from a credit union, the equivalent here is the National Credit Union Administration (NCUA). Any credit union that isn’t backed by the NCUA isn’t worth the risk.
Auto loan refinancing can be a breeze if you’re prepared for the process. Plus, it can also help you save money and beef up your wallet.