A Guide to Car Loan Refinancing

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Your car loan is not a life sentence. If you feel like you don’t want to continue making monthly repayments on a car loan because your interest rate seems disproportionately high, you can apply for a car loan refinancing.

Refinancing your auto loan can save you money in a number of ways. It can lower your interest rate, reduce your monthly payments and leave you with terms that make sense for you.

How to Refinance

The process of refinancing an auto loan can be a lot simpler and more straightforward than refinancing many mortgages. To get a new loan, you need to apply with a new lender. In most cases, the process is relatively painless—your lenders work together to handle the logistics, and you just need to submit an application.

To get prepared:

  1. Gather information about your existing loan. The most recent statement from your lender should have those details.
  2. Get information about your vehicle (if you won’t have the vehicle with you). Your VIN, make, model and year will all be helpful to have on hand.
  3. Prepare proof of income so that lenders can verify that you have the ability to repay your new loan. Several recent paystubs should be sufficient but check with your new lender for details.

Submit your application, along with any required documentation, and respond to any lender questions. Most lenders can give you an answer on the same day you apply, but some institutions might need a day or two to review your application.

If you get approved, the lender will close on the loan and pay off your existing car loan. You may be faced with a small processing fee or a state re-registration fee (typically around $5).

You’ll also need to make sure the car’s title is transferred to the new lender, which is very important. At this point, all you need to do is continue making on-time payments on your new car loan.

Where to Refinance

Any lender with competitive rates and fees is worth a look. For many borrowers, a local bank or small credit union is a great option. Those institutions tend to offer low rates, and they’re often more flexible about loan size and credit issues. Online lenders are another good source. You can take care of everything whenever and wherever it is most convenient, and you can find excellent rates online.

Get rates from at least three lenders, and do all of your shopping within a few weeks.

When lenders make inquiries into your credit, your credit scores fall slightly. Numerous inquiries become a problem over time, but you’re not penalized for shopping rates—just submit all of your applications within 14 to 30 days.

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Important Considerations

1. Credit Rating

You’ve got to have decent credit for refinancing to make sense. If your credit score is low, you may not be able to qualify for a better loan.

It’s important to check your credit score and report before submitting a refinance application so you know exactly where you stand. If you’ve been paying your car note on time for the past few months, your credit may reflect that, and you may have access to better deals and lower rates. On the other hand, if you have missed payments or carry large balances on your credit cards, your credit may need some work before you apply.

Refinancing your auto loan will save you the most if your score has gone up since you first took out your car loan. While a credit score better than 700 will get you the best auto loan rates, car loan rates can vary dramatically for people with poor, fair or average credit scores—it definitely pays to shop around!

2. Refinancing Terms

Before you start shopping around for a new loan, it’s important to understand all the terms of your current loan first. This may mean dragging out all the paperwork you initially received when you financed your car.

Make sure you know details like how long your term is, what your current interest rate is, your minimum monthly payment, and the remaining balance on your loan.

Knowing the ins and outs of your current loan will make it easier for you to determine whether a new loan is worth it.

3. Comparison Shopping

When you start shopping around and looking at other loans, make sure you read through the details carefully and compare different offers from lenders side by side—as well as next to the terms of your existing loan.

The best place to start is with your current lender. Tell them you are interested in refinancing your auto loan. Ask their terms for same bank car loan refinancing and what they can offer you. If they want to keep you around as a customer, they should try to offer you some better terms. You can also check with other banks and auto financing companies either in person or in the comfort of your own home by using trusted services online.

When you find a loan that appeals to you, make sure you are aware of any servicing fees or any possible early repayment penalties before gathering the necessary documents to submit your application.

Take a look below at the very best options for personal loans. All you have to do is fill in both your personal information and requirements for your loan. With a click of a button, you’ll find the lending partners that best match what you’re looking for.

4. Important Documents

To submit your loan application, you’ll need:

  • Basic personal information like your employment status, income, Social Security number, address, etc.
  • Information about your vehicle like the VIN number, current mileage, model and year.
  • Information about your current loan like your balance and lender name

Your lender may also want to know information like your assets, your current debt load, and, of course, your credit history before making a decision. If you apply online, you’ll just need to authorize the lender to view these documents digitally.

5. Ask Questions

If you have good credit and can obtain more favorable terms, ask your current lender if you can refinance, and then shop around to compare other auto loans. You never know what you might qualify for unless you put forth the effort and do your research.

If you think you might want to refinance, ask plenty of questions and get plenty of estimates from different lenders. No question is stupid, and no question should go unanswered. Money isn’t the only factor to consider when refinancing an auto loan. Sometimes you may also want to consider the time and effort it takes.



If you think your interest rate is too high, or are struggling to make your monthly payments, it’s worth giving refinancing a look. Auto loan terms are getting longer and longer these days. To get started, talk to our Car Loan Experts at 1300 722 210.

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