So you’ve decided you want to refinance your car loan, but you don’t know where to go. Car loans are a big business in the U.S. In fact, 43% of Americans have a car loan, according to the recent report from the Federal Reserve.
What you refinance your car loan, you get a new loan and use it to pay off your existing auto loan. Once your old loan is settled, you will begin making repayments to the new lender.
But with many borrowers come many lenders to choose from, so how do you know which one is best for you?
We’ll let you in on a little secret; there’s an easy way to find out.
Find the best lender to refinance your car
Lenders that offer car loan refinancing range from banks and credit unions to online personal loan companies like Prosper and LightStream. Each will have their own eligibility requirements, application process, rates, and terms.
You don’t want to be refinancing every other month to perpetually try and get the best deal, because that’s just inconvenient. But you may want to check in at least once per year to see if you can cut down on your costs.
For example, Todd Nelson, LightStream’s Business Development Officer, says, “To qualify for a LightStream loan, a consumer must have good to excellent credit.
That includes several years of credit history and demonstrating the ability to pay their bills on time without delinquency. They must also have sufficient income and assets to cover their debt obligations.”
You may get approved by one and denied by another or may get a higher loan amount by one and a lower interest rate by another. Vetting lenders takes a lot of time due to researching, applying, and comparing rates.
Consequentially, many borrowers settle for an offer without knowing if it’s the best. Now, thanks to advancements in technology, you can find out what multiple lenders will offer you within a few minutes. No need to visit dozens of websites and apply individually on each one.
Instead, you can simply use SuperMoney’s auto loan prequalification tool. The free form takes about two minutes to fill out. Without any negative impact on your credit score, you will then get personalized rates from leading lenders.
You can easily compare them and shortlist your top picks by visiting our Auto Loan Review Page. It offers in-depth reviews and real user ratings to help.
When should you refinance a car loan?
No one ever wants to pay more than they have to for something, right? Well, anytime you could be paying less for your car loan is a good time to refinance.
Of course, you don’t want to be refinancing every other month to perpetually try and get the best deal, because that’s just inconvenient. But you may want to check in at least once per year to see if you can cut down on your costs.
Here are a few scenarios when it could be highly beneficial:
When your credit score has gone up significantly since getting your car loan.
When interest rates have dropped due to changes in the market.
When you got a bad deal from the start.
In these cases, you will likely qualify for a lower interest rate, which means cutting your monthly payments and total cost down.
Another time when you may want to consider refinancing your car loan is when you can’t afford your payments. If you are at risk of defaulting on your loan and losing your car, refinancing may be a better alternative.
While you may not get a lower interest rate, you might be able to extend the loan terms, which lowers your monthly payment. The downside to this is that it will increase your overall cost.
However, paying more for your car and keeping it may be better than losing it and hurting your credit score.
Can you refinance a car with bad credit?
Many people wonder if they still have the option to refinance an auto loan even when their credit is not so great. Well, the better your credit, the lower the interest rate you are likely to get.
However, you still may qualify for a better deal than you have now, even with bad credit. It’s worth taking the two minutes to complete SuperMoney’s auto loan offer engine form and see what offers you get.
FAQ on refinance a car loan
Can I refinance my car with the same lender?
Refinancing is simply the process of replacing an existing loan with a new one that has a different rate and/or term. Your current lender is a great place to start when you need to refinance your car loan. If you’ve kept up with your payments and are in good standing, they may consider refinancing your current loan.
When should you refinance your car loan?
When you can replace your existing loan at a lower rate, it’s best to refinance as early as possible. Most auto loans are amortizing loans, which means you pay a fixed monthly payment with interest costs built into the payment.
Does refinancing hurt your credit?
When you apply to refinance your car, a hard inquiry will be noted on your credit, causing a temporary dip in your score. A car loan refinance also might hurt your credit by reducing the average age of your accounts. That’s because your original car loan will be paid off early and replaced by a new auto loan.
Do you need a down payment to refinance a car?
Most lenders only consider refinancing if you owe from $7,500 to $30,000, provided your car is less than 5 years old and worth at least what you owe. If you are upside down, meaning you owe more than the car is worth, you may need to pay the difference in order to refinance.
Can you refinance a car twice?
Refinancing can save you money, either in the short term with a lower payment, in the long term with lower interest or both. You can refinance as many times and as often as you want, as long as a lender will do the refinancing.
Find your best rate
When asking where you should go to refinance your car loan, the answer will be different for each person. Each lender will evaluate borrowers according to their criteria.
The best bet to find the right lender for your specific situation is to shop around and compare offers from multiple companies.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.