How Do You Refinance a Car Loan?

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Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.

, Contributing Writer - August 31, 2018

Refinancing a car loan can help you save money if you're able to get a lower interest rate than you're currently paying. You can also lower your monthly payment by increasing the loan term if your payment is suddenly too expensive. If you're worried because you don't know how to go about refinancing an auto loan, fear not. The process of refinancing a car is pretty simple.

How Does Refinancing a Car Work?

Follow these steps to make sure the auto refinancing process goes smoothly for you:

Step 1: Gather Loan and Credit Information – You need to get the information on your current car loan ready for later on in the process. Know your lender's contact information, loan payoff amount, and the year, make, model, and mileage of the vehicle. Next, it's a good idea to get your credit score and request your credit reports to get up to date on what's going on with your credit. Your credit influences whether or not you qualify for refinancing and on what terms.

Step 2: Research Different Lenders – While it sounds logical to ask your original lender about refinancing, you generally stand to get better terms with a new lender, so it's time to start researching them. Learn about rates, requirements to get approved, any fees involved, customer service, reputation, and more by looking at their websites and reading consumer reviews. Don't forget to check with your current bank or credit union, too.

Step 3: Get Multiple Quotes – Next, do some rate shopping with a few different lenders. These days, many offer online applications, making this process relatively easy. You can compare quotes from different lenders to see which offers the best interest rate and terms. A good rule of thumb is to get at least three different quotes.

Step 4: Make Sure You Can Accomplish What You Want – Break out the calculator to make sure refinancing is worth your while. Get an understanding of how much you'll spend over the term of the refinanced auto loan. Consider the quotes you received in step three against the terms of your current loan. Are you getting a lower interest rate? A lower monthly payment? How much money are you able to save? Consider things like application or origination fees with your new lender when calculating what refinancing can save you.

Step 5: Pick a Lender – Finally, you can choose the lender that's right for you and complete the refinancing process. This may be possible to accomplish online, with some lenders and loan companies offering electronic signing and funding. You can prepare the needed documents like the title, provide information to the new lender, and pay off your old lender to complete the transfer.

What is the Best Place to Refinance a Car?

The best place to refinance a car loan is going to be different for everyone because it depends on many factors regarding their loan, vehicle, and situation. Here are some of the main factors that influence where you should go to refinance your car loan:

  • Rates and Fees – Different lenders offer different auto loan interest rates and fees to process the new loan. This is what makes the research (step two above) and multiple quote (step three) stages so important. Going with the lender that's able to offer the most favorable terms helps you save even more.
  • Your Credit – Your credit score is the biggest factor that determines the interest rate you qualify for. While the best rates are reserved for borrowers with the best credit, doing research can help you find lenders offering competitive rates for people with similar credit scores.
  • Your Car and Loan – Lenders also have minimum and maximum loan amounts they're willing to refinance, as well as maximum age and mileage limits for vehicles. You need to make sure your loan and car meet the lender's guidelines.

The Bottom Line

Refinancing a car loan is similar to qualifying for the original loan. It's all about doing the necessary research and work to make sure you're prepared and able to make a smart decision. CarsDirect is partnered with RateGenius if you're interested in refinancing, but we can also help those who need an auto loan.

We work with dealerships all across the country that specialize in helping consumers in nearly all types of credit situations. CarsDirect will work to match you with a local dealer if you start the process by filling out our secure auto loan request form online. The process is free of cost and obligation, so you can start with confidence today!

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, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.

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