When To Try for Auto Loan Refinancing

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Even with poor credit.

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Content Manager

Bethany Hickey is is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 


, Content Manager - March 1, 2021

Auto loan refinancing can be a great way to save cash while you’re in a car loan. Many borrowers start a loan and aren’t completely satisfied with the terms, but refinancing offers you the chance to change that – literally! The timing of when you apply for refinancing impacts your eligibility, though, so here’s what you need to know.

Auto Loan Refinancing Quickly Defined

Refinancing a car loan means applying for another loan on the vehicle you currently have and getting the old one paid off. Your new loan pays off the original one, and usually, the main goal is to get a lower monthly payment. You may qualify for a lower interest rate or a longer loan term (or both) to get a smaller car payment.

Bad credit borrowers commonly seek refinancing, since a lower credit score can lead to a higher than average interest rate. After making on-time payments for a while it’s likely your credit score has improved, which could qualify you for lower rates now.

Whether you’re just not happy with your lending institution, need more time to pay off your car, want smaller payments, or just want to save money on your loan overall, refinancing could help if you qualify.

When’s a Good Time to Refinance?

After about one year of having your auto loan, you’ve got a higher chance of qualifying for refinancing. Most lenders are wary to approve refinancing on auto loans that are less than a year old. It’s also not advisable to attempt refinancing close to the end of your car loan since many lenders have restrictions on loan age.

For a higher chance of approval, apply for refinancing at least one year after the start of the loan, and at least one year before it ends.

The age and mileage of your vehicle matter, too. If you purchased a used car that's now over 10 years old, it may be difficult to find a lender willing to refinance. the same goes for high-mileage as well, most auto refinancing lenders require your vehicle to have less than 100,000 miles.

Tips on Refinancing Your Car Loan

Most consumers look for another lender to refinance their car, since they may be able to find better rates or terms with a different lender. Many people rate shop as well, applying with multiple lenders within 14 days so only one hard credit pull impacts their credit score.

While you’re rate shopping, it’s important to know where your credit score sits on the spectrum. We advise reviewing your credit reports from TransUnion, Experian, and Equifax, to see where your credit stands. Doing a little research on the average interest rates other borrowers are qualifying for with a credit score similar to yours could give you some leverage when you’re negotiating with a refinancing lender.

Another tip to remember is that how you refinance matters. By just extending your loan term without lowering your interest rate, it’s going to cost you more in the long run. Since most car loans are simple interest (where interest charges add up daily), so, the longer you have the loan the more interest charges you pay. Keep in mind that extending your auto loan means paying more in interest charges for the vehicle, and if you’re not careful, it could lead to negative equity or paying much more than the car is worth.

Refinancing Not the Solution for You?

If you’re not confident that you or your vehicle can qualify for refinancing, then another route could be trading it in for something more affordable. Even if you have less than perfect credit, there are bad credit auto lenders that could assist with your situation.

When bad credit is making it difficult to get approved for another car loan, consider subprime lenders signed up with special finance dealerships. These lenders take a different approach to determine your auto loan eligibility by examining many aspects of your credit history and financial stability. They often assist borrowers that have gone through a bankruptcy or repossession, and those with tarnished credit histories.

Let Us Point You in the Right Direction

Here at CarsDirect, we’re partnered with dealerships all over the country that help borrowers with poor credit get vehicle financing. We match borrowers to dealers with bad credit lending resources, and we want to help you too.

Using our nationwide network, we’ll look for a dealer in your local area with no cost or obligation. Get started right now by completing our auto loan request form.

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, Content Manager

Bethany Hickey is is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 


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