How to Get Your Car Loan Refinanced

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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.

, - July 11, 2019

Taking out a bad credit car loan is a great way to help you improve your credit score over time. If you want to lower your monthly payment and/or qualify for a better interest rate, you need to refinance the loan. However, there’s some prep work you need to do, and we’re here to tell you how to set yourself up to do it.

Steps to Take toward Refinancing Your Car

In order to refinance your current auto loan, you need to make sure at least a year has passed since taking out the original loan. Lenders like to see that you’ve kept up with the monthly payments, and that you’re serious about successfully completing the loan. In addition, your credit score needs to have improved, and, depending on where your credit was, it could take a year or more to build it up to where it needs to be.

When at least one year has passed and you’re considering refinancing, you need to do these five steps, in order:

  1. Check your credit – You need to know your credit score and what’s on your credit reports before you talk to a lender about refinancing. If your bank, credit union, or credit card provider doesn’t offer a free FICO credit score check, you can get your FICO score, and your auto-enhanced FICO score, at by paying a small fee. In addition, you’re entitled to a free copy of your credit reports every 12 months from each of the three major credit bureaus – Equifax, TransUnion, and Experian – at Make sure all the information is correct, and dispute any errors to the credit bureaus immediately.
  2. Research current interest rates – The Federal Reserve sets the nation’s overnight bank interest rate – what lenders base their rates on – and it can fluctuate quarterly. Check out the rates current car buyers in your credit score range are getting. This way, you won’t be surprised if a lender offers you an interest rate slightly higher than what you expected. Doing this could also give you a chance to wait and see if interest rates are expected to drop.
  3. Gather vehicle and loan information – Make sure you know your car. This means knowing its vehicle identification number (VIN), make, model, year, and mileage shown on the odometer. You should also research its current market value by visiting vehicle valuation sites such as NADAguides. In addition, make sure you know your current loan’s terms, including the interest rate, length, and monthly payment amount.
  4. Request a payoff quote – Once you feel confident about where your credit stands and you’re familiar with the current interest rates, you should request a 10-day payoff quote from your current lender. The payoff amount includes additional interest since your last loan statement, and if there’s a pre-payment penalty (there shouldn’t be). From there, determine the difference between your car’s current market value and the payoff amount. If you owe more than the vehicle’s worth – called negative equity – you need to come up with the difference before you can refinance the loan.
  5. Shop around – Rate shopping is the best way to find the best refinancing deal. While you can choose to refinance with your current lender, we recommend checking with at least one other one. Keep in mind that different lenders have specific requirements your car must meet. Ask what they are, and make sure your vehicle falls within their guidelines. Generally, lenders don’t refinance cars that are over 10 years old and/or with more than 100,000 miles.

Stuck on the Last Step?

If you’ve gone through steps one through four, but don’t know where you should be looking for a lender to refinance, we want to help. Through our partnership with RateGenius, we can help you find a place to refinance your auto loan.

We can also help if you’re simply in need of a bad credit car loan. At CarsDirect, we work with a nationwide network of dealerships that have the lending resources available to handle unique credit situations.

Just fill out our free-of-cost, no-obligation auto loan request form, and we’ll get right to work connecting you to a dealer near you.

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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.

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