How Can I Get My Auto Loan Refinanced?

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - January 30, 2019

Auto refinancing is when you pay off an existing loan and open a new one using the same vehicle as collateral. It’s a great way to get a better interest rate or a lower your monthly payment. But, how exactly do you refinance a car loan?

How to Refinance Your Car Loan

If you’re looking to refinance your auto loan, the first step you need to take is to see where your credit score and reports stand. You can check your auto-enhanced FICO score for a fee by visiting www.myFICO.com. You’re entitled to a free copy of your credit reports every 12 months from each of the three major credit bureaus (TransUnion, Equifax, and Experian). You can get them by visiting www.annualcreditreport.com.

If you find your credit score has improved since taking out your car loan, and a few years have passed, you can consider refinancing. One of the main requirements for auto loan refinancing is your credit. If your credit score hasn't improved since you took out your current car loan or it's gotten worse, you aren't going to be able to refinance.

The next step is to ask yourself if auto loan refinancing is right for you. Did you initially take on a car loan with an interest rate as high as 16 percent and want a better rate? Or do you need to make your monthly payment more affordable, but don’t have extra cash to help pay off the loan sooner and need to extend the loan term? If one or both of these situations sounds like you, refinancing could really help.

Once you’ve reflected on why you want to refinance, it’s time to find a lender to work with. In some cases, you can refinance your auto loan with the same lender, but you typically need to find a different lender to refinance with. If you have a good relationship with your bank or credit union, start there first before rate shopping.

When Car Refinancing Doesn’t Make Sense

Not everyone benefits from refinancing. There are some specific cases where refinancing just doesn’t make sense, and they include:

  1. Being upside down – In order to refinance, you can’t have negative equity in your vehicle. If you can’t pay off the difference right away, then you have to wait until you have equity before refinancing.
  2. Being delinquent – If you’re currently behind on your monthly payment, or you have an extensive history of being delinquent, a lender isn’t going to refinance you.
  3. Having an old car – Depending on how old your vehicle is and how many miles are on it, a lender may turn you down for refinancing. Lenders have auto refinancing requirements, and if your vehicle falls outside of them, you’re out of luck.

The Bottom Line

Refinancing is a great way for bad credit car buyers to get a better interest rate. The issue is it takes time before your credit score can improve, and you typically need to wait around two the three years before refinancing. But if you’re looking to simply take on an auto loan, and worry your credit’s holding you back, let CarsDirect help.

We work with dealerships all across the country that specialize in helping consumers in nearly all types of credit situations. We want to match you with a local dealer today if you start the process by filling out our secure auto loan request form online.

Need a Car Loan?

It only takes a minute.

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.