Get Started
Talk to our team to start saving 800.260.5355
When you’re not happy with your car payment, one option is to refinance your auto loan. Auto refinancing works by replacing your existing car loan with a new one. The new loan could have a different interest rate, or a longer or shorter repayment period. With a new car loan, you could reduce your monthly payments or decrease your interest costs.
Auto refinancing can be a great solution, but it might not be the right choice for everyone, especially if your current loan is almost paid off. Learn how to refinance a car and what’s involved in the process with our guide below.
Auto refinancing means replacing your existing loan with a new one. Ideally, the new auto loan has a lower interest rate or a longer repayment period, which lowers your monthly payment. In a nutshell, here’s how auto refinancing works: You apply for a new car loan, using it to pay off your old car loan. Then you make payments on the new loan until it is paid off.
It is not uncommon for vehicle owners to have a car loan that’s too expensive for them. Sometimes life circumstances change, and a monthly payment that was once affordable no longer fits your budget. Here are few instances where it may make sense to refinance:
Timing matters: Learn more about the best time to refinance your car.
There are various reasons to consider refinancing. Every situation is different, so it helps to know the benefits of a refinance. Below are a few reasons some borrowers decide to refinance.
Refinancing your existing loan into one with a significantly lower interest rate could save you money. The lower the rate, the less the loan will cost you. Low-interest rates and shorter terms offer some of the best ways to reduce the costs you’ll pay over the lifetime of your loan.
If your income drops or the loan has a very high interest rate, you might struggle with a high monthly payment. Auto refinancing with a lower interest rate or longer loan length may help you get a lower car payment.
Refinancing is a way to add or remove a cosigner from your auto loan. This can be helpful if your circumstances have changed — for instance, if you’ve divorced or your credit score has gone up. Auto refinancing helps adjust the loan to match your situation.
If your car is worth more than what you owe on it, you have equity. The way auto refinancing works, you can turn that equity into cash by changing your loan terms.
Let’s say you own a car that is currently worth $18,000. You’ve worked to pay down your auto loan. You owe around $8,000 on it. That means you have about $10,000 worth of equity in the car.
You may be able to refinance your current auto loan and borrow more against your car. Instead of owning $8,000, you may owe $12,000 now. You can use the extra $4,000 for anything you want or need.
To understand how auto refinancing works, let’s walk through each step in the refinancing process:
To be eligible for a refinance, you’ll typically need decent credit, a steady income, and a car that’s worth more than what you owe.
That’s because lenders need to be sure the vehicle is worth enough to back up the value of the loan. They are often happy to offer a loan to you if your car is worth at least as much as you wish to borrow. They’ll typically request information about the car, including details about its make and model, age, condition, mileage, and vehicle history. That information helps them determine the value of the car compared to the loan amount. It can be difficult to refinance older cars because they’ve lost a lot of their value.
If you owe more on your car than it is worth, you have an upside-down loan. In this situation, the lender may be unable to provide a loan to you unless you pay down the debt you owe on it.
Next, lenders need some information from you to assess their level of risk. If you’re a low-risk borrower, you may qualify for a lower interest rate on your auto loan. If you’re high-risk, due to poor payment history on other loans, you might qualify for a high interest rate instead.
When getting an auto refinance loan from RefiJet, you will be asked to provide basic information, such as:
This information helps prospective lenders determine what loan options they can offer you. At RefiJet, your personal information is always protected and safe with us.
Learn more about auto loan refinancing requirements.
With your documents in hand, you can shop for a new lender. It’s important to compare loan offers from multiple lenders so you can find the best deal. Some lenders may be a better fit for you than others, but you won’t know until you start researching.
When comparing lenders, there are several factors to look at:
One lender might offer a lower rate but higher fees, for example. Make sure you compare all aspects of the loan to find the best offer. RefiJet helps you compare multiple lenders at once, saving you time and helping you find the right fit.
Once you’ve found the lender you like, it’s time to apply. The loan application process for a refinance is much the same as for an auto loan. Fill out the application, providing your personal information, details about your vehicle, and desired loan amount.
After you apply, the lender will review your application and either approve or decline you. If approved, sign the loan paperwork to close the deal. The new lender may pay off your old loan for you; if not, you’ll do it yourself. Then all that remains is to make payments to the new lender.
Here are some questions to help you decide if an auto refinance is the best choice:
Evaluate your financial goals and consider the pros and cons of refinancing before making a decision.
Now that you know how auto refinancing works, you can take the next step. RefiJet does the heavy lifting for you. We’ll show you available loan offers from multiple lenders, and you choose the one you like best, with no obligation and no effect on your credit score.
RefiJet is committed to providing you with exceptional service. Learn what options may be available in your situation or check out our blog for more information on how auto refinancing works.
It could be easier than you think to find a new auto loan. Get started now.
Here are some common questions you may have about refinancing.
A monthly payment that’s too high could put you at risk for default. That could harm your credit score in the long term. A new loan may help you alleviate some of those high payments and ensure you can make monthly payments. There’s no effect on your credit score to find out if you qualify with RefiJet. If your application moves forward, the lender will make a hard credit inquiry.
Our loan offers can give you some of that information once you start the auto refinance process with RefiJet. Then, you’ll be able to see which loans offer the lowest rates or the lowest monthly payment. That may provide you with some information about how much you personally can save by refinancing.
Not when you use RefiJet. When you request a loan from us, we perform a soft credit pull (remember, that doesn’t hurt your credit score). That allows us to find loans you pre-qualify for without the need to pull your credit report repeatedly.
Yes, you may be able to add a co-borrower to your loan. If that person has a good credit score, it may help you qualify for a lower interest rate. You can refinance your auto loan by adding (and removing) a co-borrower if you would like to do so.
Lenders take into account numerous factors to determine if they can provide a loan to you and, if so, how much you’ll pay for it. This may include your credit score, debt-to-income ratio, and the value of your car. Lenders typically want to be sure you have the financial means to repay your debt.
First, check the value of your vehicle and compare it to what you owe on your loan. Gather up your identification and financial documents (such as paystubs). Use RefiJet to streamline the process and compare multiple offers from top lenders. Choose the lender you like and apply.
It can take just a few minutes to apply for an auto refinance. The lender will review your application, which can take a few days or weeks (although some lenders are faster).
You typically don’t need to put money down when you refinance. If your car is worth less than the amount you owe, however, you might need to put money down to get approved for a new loan.
Need to get rid of your financed motorcycle? Explore your options to sell, trade, or refinance — even if you still owe money on the loan.
