If you’re unhappy with your current interest rate or monthly payment, then refinancing your auto loan might be a good option.
It could be a smart move if interest rates have dropped, your credit has improved, or you didn’t explore all your loan options the first time around.
Here are our top picks for refinancing your auto loan, along with some tips on how to get the best loan possible.
Ready to get the ball rolling?
Best Options to Refinance a Car Loan
Auto Credit Express
If you have less than perfect credit, Auto Credit Express may be an option worth considering.
They’re a large network with over 1,000 dealer partners that specializes in helping those with bad credit secure or refinance their current loan. However, they also have great options for good to excellent credit borrowers.
To qualify for refinancing, you must be current on your monthly payments and have equity in your vehicle.
Also, keep in mind that lenders will have their own set of criteria. That usually entails a maximum vehicle age limit of 10 years, a mileage limit of 100,000 or less, and a minimum loan amount of $5,000.
You should also know that they are accredited by the Better Business Bureau with an A+ rating. If you’re interested in refinancing your vehicle, complete the online application. The application process only takes three minutes. You’ll get a rapid response to know if you’ve been matched with potential lenders.
If you have average credit, rateGenius can likely lower your monthly payment. In fact, the average customer savings is $78.
Operating in all 50 states, it has partnered with over 150 lenders nationwide and has an average customer satisfaction number of 4.9 out of 5.
To qualify your loan must be more than $10,000 and less $90,000. Your car cannot be older than ten years, nor can it have more than 150,000 miles on it. Additionally, you must earn at least $2,000 or more each month and your credit score needs to be at or above 525.
If you change your mind at any point during the application process, you’re never under any obligation to commit and can circle back if you choose when you’re ready.
Unlike most refinance companies that just refinance auto loans, you can refinance just about any vehicle you can think of. They offer refinancing options for trucks, SUVs, RVs, motorcycles, and boats. Use their loan calculator to figure out how much money you can save by refinancing.
If you prefer to explore multiple lenders by only completing one application, LendingTree is a smart option.
It’s an online marketplace that allows you to select your desired loan terms (up to 84 months) and view offers without impacting your credit.
Before submitting your application, you can also use their online tool to view auto refinance rates by location. The form will prompt you to enter your zip code, loan amount and credit rating, and display the lowest APRs available for refinancing by loan term.
If you want to compare multiple offers for your auto refinance, consider LendingClub. After filling out a brief form with some personal and vehicle information, you could get offers from several lenders within minutes.
If any of the terms and interest rates look favorable, you can then fill out a full application and submit any necessary supporting documents. After that, your former auto loan is immediately paid off with your new loan funds and you can start making payments to your new lender.
In order to qualify for an auto refinancing within LendingClub’s network, your car must be less than ten years old and have less than 120,000 miles on it.
Your existing loan must be between $5,000 and $55,000, at least one month old, and have at least two years of payments left on it. If you meet these basic requirements, you can fill out the rate request form to see if you could save money by refinancing your current loan.
MyAutoLoan is also an online marketplace that gets you up to four auto refinance offers at once.
Rates are as low as 2.24% for those with excellent credit. However, not having a good credit history won’t necessarily prevent you from qualifying.
It’s easy to apply and upon approval, you’ll receive an online certificate or check within 24 hours. Simply submit the online application, explore the loan offers and select the one that best suits your needs. Once you’ve submitted all the necessary paperwork, the lender will take it from there.
AutoPay is also an online marketplace that offers rates as low as 5.49% on auto loan refinancing. Customers have three types of refinancing to choose from:
- Traditional refinancing: designed to lower your interest rate and car payment
- Cashback refinancing: designed to put money back into your pocket
- Lease payoff refinancing: designed to help you pay your lease in full before the lease term expires so you can keep the vehicle and avoid fees.
Even better, they cater to consumers with all types of credit, so having a bad credit score doesn’t mean you won’t qualify for a more competitive rate. And when you submit a pre-qualification application, AutoPay does a soft pull so your credit is not impacted.
When to Consider Refinancing
There are several situations in which you may consider refinancing your auto loan. Here’s a rundown of the most common reasons to see if an auto loan refinance could be a smart choice for you.
- When interest rates are lower than when you took 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 loan.
How to Refinance a Car Loan
Check Your Credit
Before applying with a lender, check your credit to see where you stand. Don’t overlook this pertinent step since credit plays a major role in whether or not your application is approved.
Grab a free copy of your credit report. 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 lenders use FICO scores to evaluate creditworthiness, their algorithms tend to vary across the board. So, your concern should be with what’s in your report since that’s where your credit score is derived from.
You may be able to refinance your car loan through a local financial institution, like a bank or credit union. However, there are scores of online lender and online loan marketplaces that may be worth considering.
This will help you determine which lenders are offering the most competitive 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.
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.
Lenders will need to verify key information included on your application to approve you for refinancing. 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 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
Now that you have the loan approvals in hand, the next step is to analyze the figures to determine if the benefits of refinancing outweigh the costs. You can do so by entering the numbers into a refinancing calculator.
Here are a couple 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 car payment is $375 and you have $10,000 left on the original loan, which will be paid over the next three years. If your current rate is 6% and the lender agrees to lower the rate by 5%, but with a new term of six years, your monthly payment will drop down 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.
Review the Final Loan Documents
Before signing on the dotted line, go over the loan documents in their entirety. If there’s any verbiage or terms that seem a bit strange or unfamiliar, seek clarity to avoid confusion later on down the line.
Once you approve and sign, the lender will send detailed instructions to wrap up the process. Moving forward, you will deal with the new lender to make payments and address any questions or issues with your auto loan.
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 down.
The lender should be able to provide you with insight on why your application was denied, and this will serve as a starting point to make improvements and try again. But if you don’t know where to start, check out our ultimate guide on how to repair your credit.
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.