How to Refinance a Car Loan

Here at MoneyFor, our goal is to help you make informed financial decisions. We are committed to accuracy and impartiality in all our content. It’s important to note that articles may reference products from our partners who compensate us. This influences which products we feature and their presentation on our site, not our evaluation.

Key takeaways

Refinancing a car loan can reduce your interest rate, lower your monthly payments, or adjust your loan term.
You may be able to refinance even with bad credit, especially if your financial situation has improved.
Prequalify and compare loan offers from multiple lenders to find the best deal and ensure that refinancing is worthwhile.

Refinancing a car loan can lower interest and help you save money or reduce your monthly payments. It’s a good choice if your credit score has improved since you took out the original loan or if you were stuck with poor terms.

When you refinance, you take out a new loan and use the funds to pay off your original one. The new auto loan may have a lower interest rate or come with different terms.

Interested in refinancing? We’ll walk you through the steps and what to consider before you apply.

What does refinancing a car mean?

When you refinance a car loan, you replace your current loan with a new one, ideally with better terms. You or the lender uses the funds from the new loan to pay off your existing balance. You then start making payments on the new auto loan.

One of the primary benefits of refinancing a car is lowering your interest rate, which can result in significant savings over time. It can also make your monthly payments more affordable, so your finances are not stretched too thin.

You can refinance a used car loan, not just loans on newer vehicles. Lenders may have age or mileage restrictions, so it’s essential to check their requirements. While refinancing can save you money, it may incur additional fees and increase the total amount of interest you pay.

Can you refinance a car loan?

You can refinance a car loan. Refinancing gives you a fresh start with a new lender or loan agreement that replaces your existing auto loan. The key is finding a refinance offer that improves your financial situation.

Refinancing can be a smart move if your credit score has improved since you took out your loan or if interest rates have dropped. If you received a bad credit car loan before, refinancing may help. It can lower your interest rate, give you better terms, and save you money.

Your new car loan may have a lower APR, but it may also extend the loan term. A longer loan term often means lower monthly payments. This is beneficial if you’re having trouble meeting your monthly obligations. Be cautious, as lower payments on a longer-term loan typically result in paying more interest over the life of the loan.

Want to buy a car with bad credit?

How to get a car loan with bad credit

When can you refinance a car loan?

You can generally refinance a car loan as soon as the dealership transfers the title to your name. This process usually takes 60 to 90 days. Some lenders have specific waiting periods and may not permit immediate refinancing. Others do not impose a waiting period.

While you can refinance your loan within the first three months, it’s usually best to wait at least six months to a year. The self-imposed waiting period provides you with the opportunity to establish credit through on-time payments. A higher score lets you refinance for better terms.

When to refinance	When NOT to refinance
You’ve improved your credit score	Your credit is poor, and you can’t qualify for a lower rate
Interest rates have dropped	Interest rates increased
You will save money on interest	Fees outweigh savings
You need lower monthly payments	You can afford your monthly payments
You have significant equity in your car	You owe more than your car is worth

Does refinancing a car hurt your credit?

Refinancing a car can cause a slight dip in your credit score, but the impact is usually minor and short-lived. When you apply for a new loan, lenders perform a hard inquiry, which lowers your score by a few points.

Opening a new loan and closing an old one can shorten your average credit history, potentially lowering your score. But if refinancing lowers your monthly payment and helps you avoid missed or late payments, it can improve your credit over time.

Responsible repayment of the new loan is key. So while there may be a slight short-term dip, refinancing is unlikely to cause severe damage to your credit if managed wisely. It can even improve your score if you consistently pay on time.

Refinancing a car loan in 5 steps

New

Turn easy tasks into real rewards –
worth up to $499/year!

If you’re ready to lower your monthly payment or score a better interest rate, refinancing your auto loan could be a smart move. Here’s how to go about it step by step.

1. Check your current auto loan

Start by reviewing the terms of your existing loan. You need to know how much you have left to pay, your current interest rate, and your monthly payment. Check if your lender charges a prepayment penalty if you pay off the loan early.

Knowing your payoff amount, interest rate, and term helps you decide whether refinancing makes financial sense. You don’t want to take on a loan where you pay more interest if you’re juggling other expenses, such as auto repair loans or high-interest credit cards.

2. Check your credit

Check your credit score to determine what you can expect in terms of approval and interest rates. If your score has improved since you first got your loan, refinancing can make sense. You will likely qualify for better rates and will save money.

You can refinance a car loan with bad credit since lenders consider other factors. Look for lenders that offer bad credit auto loans, but note that you will not receive the most favorable terms.

3. Collect relevant documents

The exact paperwork you’ll need varies by lender. The majority of lenders request the following documentation:

Your driver’s license
Vehicle registration
Proof of insurance
The vehicle identification number (VIN)
Vehicle’s make, model, and year
Proof of income (pay stubs or tax returns)
Proof of residence (utility bills or lease agreement)
Your Social Security Number
Current loan information, including payoff amount

4. Compare offers from multiple lenders

Don’t settle for the first offer you receive. Shop around and prequalify for loans before you formally apply. Prequalifying allows you to compare rates and payment estimates with a soft credit check.

Once you have at least three loan offers, compare them to determine whether refinancing is a worthwhile option. Look closely at the APR, loan term, monthly payments, and total interest paid.

Often, a new loan will have different repayment terms. If you extend the loan term, you will likely lower your monthly payments but pay more in interest overall. Paying more interest may be worthwhile if you’re struggling to keep up with your loan payments.

5. Apply for a new car loan

Once you’ve chosen a loan and lender, it’s time to apply. When you formally apply, you may need to provide additional information.

The new lender will typically pay off your old loan directly. If not, they will give you the funds to do so. You’ll start making payments on the new loan under the agreed terms.

Pros and cons of refinancing a car

Pros:

Lower your monthly payment
Reduce your interest rate
Pay off your loan faster
Free up cash for other expenses
Remove or add a co-signer
Possibly tap into the equity in your car
Improve loan terms if your credit has improved

Cons:

You may pay more in interest with a longer loan term
Prepayment penalties could reduce your savings
Refinancing resets the loan term, extending your debt
Some lenders charge application or title transfer fees
It may be harder to refinance if you have negative equity
You could end up upside-down on your loan

Alternatives to auto loan refinancing

Refinancing doesn’t make sense for every situation. If you’re looking for a more affordable car or quick cash, consider these alternatives.

Trade in your vehicle
Sell your car and buy a cheaper one
Lease a car with bad credit
Request a loan modification

If you have no other way to receive cash, consider an emergency car title loan. Title loans are high-interest loans that use your vehicle’s title as collateral. The lender may repossess your vehicle if you fail to pay on time.

9.7

Moneyfor score

Access $1000 Instantly without Credit Check

Same Day Loan
Instant Approval Loan No Credit Check
Instant Cash Loan Today

Access $1000 Instantly without Credit Check

Frequently asked questions

1. How does refinancing a car work?

Refinancing a car means replacing your current auto loan with a new one. The new lender pays off your existing loan, and you begin making payments on the new agreement. Refinancing can lower your interest rate, reduce monthly payments, or change the loan term.

2. Is refinancing a car worth it?

Refinancing a car can be worth it if it saves you money. Lowering your interest rate or monthly payment can help ease financial stress or accelerate loan repayment. Refinancing is typically not worth it if the new loan has longer terms, as this will result in higher payments over time.

3. How long does it take to refinance a car?

Refinancing a car usually takes a few days to a couple of weeks. Most agreements are finalized within 10 to 15 business days. The timeline varies depending on the lender and the speed at which you provide the required paperwork.

4. Does refinancing a car cost money?

Refinancing may involve fees depending on the lender. Potential fees include application or origination fees, title transfer fees, registration fees, and prepayment penalties.

5. Can you refinance a car loan with the same lender?

Some lenders allow you to refinance with them, especially if your financial situation has improved. Having an existing relationship with the lender can improve your chances of securing a favorable loan; however, it is still advisable to shop around. You might find a better interest rate or repayment terms.

6. How soon can you refinance a car loan after purchase?

You can typically refinance 60 to 90 days after taking out your original loan, but it’s recommended to wait six months to a year. Refinancing too soon may not yield better terms since you do not give your credit score time to improve.

7. What do you need to refinance a car?

To refinance your auto loan, you will need a decent credit score and to have equity in your vehicle. The new lender will require information about your car, as well as details regarding your current loan and lender.

Bottom line

Refinancing your car loan can help you save money and make timely payments. You can lower your monthly payments or reduce the total interest owed. The ideal car loan will do both, and you might be able to get one if your credit has significantly improved.

Before you replace your old car loan, consider the total costs. Ensure the new loan is beneficial and not excessively costly in terms of interest and fees. Refinancing should help your financial situation, not hurt it.

1. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions.

2. Paycheck Advance is an earned wage access service and is not a loan or credit product.

3. Current is a financial technology company, not an FDIC-insured bank. FDIC insurance up to $250,000 only covers the failure of an FDIC-insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply. Banking services provided by Choice Financial Group, Member FDIC, and/or Cross River Bank, Member FDIC. The Current Visa® Debit Card, which may be issued by Choice Financial Group and/or Cross River Bank, and the Current Visa® secured charge card, which is issued by Cross River Bank, are all issued pursuant to licenses from Visa U.S.A. Inc. and may be used everywhere Visa debit or credit cards are accepted. A Current debit account is required to apply for the Current Visa® secured charge card. Independent approval required.

4. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

5. Debit card: Fees may apply, including out of network cash withdrawal fees, third-party fees, cash load fees, inactivity fees, account closure fees, international transaction fees, replacement card fees, express mail fees and escheatment fees. Build Card: Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.

6. The Current Visa® Debit Card is issued by Choice Financial Group pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Current Visa® secured charge card is issued by Cross River Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see the back of your Card for its issuing bank. Current Individual Account required to apply for the Current Visa® secured charge card. Independent approval required.

7. Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.

8. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

9. Funds held in Savings Pods are FDIC-insured on a pass-through basis up to $250,000 at our partner bank Choice Financial Group, member FDIC.

10. Actual overdraft amount may vary and is subject to change at any time, at Current’s sole discretion. In order to qualify and enroll in the Fee-Free Overdraft feature, you must receive $500 or more in Eligible Direct Deposits into your Current Account over the preceding 35-day period and fulfill other requirements subject to Current’s discretion. Negative balances must be repaid within 60 days of the first Eligible Transaction that caused the negative balance. For more information, please refer to Fee-free Overdraft Terms and Conditions. Individual Current Accounts only.

11. For eligible customers only. You may earn Points in connection with your Build Card purchases at retailers whose merchant code is classified as: Dining (e.g., restaurants) and Groceries (e.g., supermarkets) and by completing other actions that Current designates as subject to the Current Points Program. The amount of Points granted for different actions as well as the purchase requirements necessary to earn Points will vary, and is subject to Current’s sole discretion. After qualifying, please allow 3-5 business days for points to post to your Current account. Points will expire 365 days after they settle. For more information (including specific eligibility criteria), please refer to the Current Points Terms and Condition.

12. Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.

13. Boost Bonuses are credited to your Savings Pods within 48 hours of enabling the Boost feature and on a daily basis thereafter, provided that the Savings Pod has accrued a Boost Bonus of at least $0.01. No minimum balance required. The Boost rate on Savings Pods is variable and may change at any time. The disclosed rate is effective as of August 1, 2023. Must have $0.01 in Savings Pods to earn a Boost rate of either 0.25% or 4.00% annually on the portion of balances up to $2000 per Savings Pod, up to $6000 total. The remaining balance earns 0.00%. To earn a Boost rate of 4.00%, the sum of your Eligible Payroll Deposits over a rolling 35-day period must be $500 or more, with at least one Eligible Payroll Deposit equalling a minimum of $200. For more information, please refer to Current Boost Terms and Conditions.

14. Your money is FDIC-insured on a pass-through basis up to $250,000 at each of our partner banks, Choice Financial Group and Cross River Bank, members FDIC.

15. Average value based on Fine Hotels + Resorts bookings in 2023 for stays of two nights. Benefits include daily breakfast for two, room upgrade upon arrival when available, $100 amenity, guaranteed 4PM late checkout, and noon check-in when available. Certain room categories not eligible for upgrade. $100 amenity varies by property. Actual value will vary based on property, room rate, upgrade availability, and use of benefits.

16. Up to $500 per Covered Trip that is delayed for more than 6 hours; and 2 claims per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

17. The maximum benefit amount for Trip Cancellation and Interruption Insurance is $10,000 per Covered Trip and $20,000 per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

18. Baggage Insurance Plan coverage can be in effect for Covered Persons for eligible lost, damaged, or stolen Baggage during their travel on a Common Carrier Vehicle (e.g. plane, train, ship, or bus) when the Entire Fare for a ticket for the trip (one- way or round-trip) is charged to an Eligible Card. Coverage can be provided for up to $2,000 for checked Baggage and up to a combined maximum of $3,000 for checked and carry-on baggage, in excess of coverage provided by the Common Carrier. The coverage is also subject to a $3,000 aggregate limit per Covered Trip. For New York State residents, there is a $2,000 per bag/suitcase limit for each Covered Person with a $10,000 aggregate maximum for all Covered Persons per Covered Trip. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

19. Car Rental Loss and Damage Insurance can provide coverage up to $75,000 for theft of or damage to most rental vehicles when you use your eligible Card to reserve and pay for the entire eligible vehicle rental and decline the collision damage waiver or similar option offered by the Commercial Car Rental Company. This product provides secondary coverage and does not include liability coverage. Not all vehicle types or rentals are covered. Geographic restrictions apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.

20. Coverage for a Stolen or damaged Eligible Cellular Wireless Telephone is subject to the terms, conditions, exclusions, and limits of liability of this benefit. The maximum liability is $800, per claim, per Eligible Card Account. Each claim is subject to a $50 deductible. Coverage is limited to two (2) claims per Eligible Card Account per 12 month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

21. When an American Express® Card Member charges a Covered Purchase to an Eligible Card, Extended Warranty§ can provide up to one extra year added to the Original Manufacturer’s Warranty. Applies to warranties of five (5) years or less. Coverage is up to the actual amount charged to your Card for the item up to a maximum of $10,000; not to exceed $50,000 per Card Member account per calendar year. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

22. Purchase Protection is an embedded benefit of your Card Membership and requires no enrollment. It can help protect Covered Purchases made on your Eligible Card when they’re accidentally damaged, stolen, or lost, for up to 90 days from the Covered Purchase date. The coverage is limited to up to $10,000 per occurrence, up to $50,000 per Card Member account per calendar year. Coverage Limits Apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

23. Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.

24. The secured Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.

25. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

26. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of September 20, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.

27. There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account.

28. To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

29. Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.

30. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

31. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

32. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

33. SpotMe® on Debit is an optional, no fee overdraft service attached to your Chime Checking Account. To qualify for the SpotMe on Debit service, you must receive $200 or more in qualifying direct deposits to your Chime Checking Account each month and have activated your Visa debit card. Qualifying members will be allowed to overdraw their Chime Checking Account for up to $20 on debit card purchases and cash withdrawals initially but may later be eligible for a higher limit of up to $200 or more based on Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. The SpotMe on Debit limit will be displayed within the Chime mobile app and is subject to change at any time, at Chime’s sole discretion. Although Chime does not charge any overdraft fees for SpotMe on Debit, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe on Debit will not cover any non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe on Debit Terms and Conditions.

34. Tipping or not tipping has no impact on your eligibility for SpotMe®.

35. Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.

36. Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.

37. Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.

38. Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.

39. Funds are automatically debited from your Checking Account and typically deposited into the recipient’s Checking Account within seconds. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed.

40. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed. Non-Chime members must use a valid debit card to claim funds.

41. MyPay is only offered in select states

42. To be eligible for MyPay, you must receive qualifying direct deposits to your Chime Checking Account as set forth in the MyPay Agreement. A qualifying direct deposit is a deposit from an employer, payroll provider, gig economy payer, government benefits payer, or other permitted source of income by Automated Clearing House (“ACH”) or Original Credit Transaction (“OCT”). Your MyPay Credit Limit and Maximum Available Advance may change at any time. MyPay is a line of credit and available limits are based on estimated income and risk-based criteria. Eligible members may be offered a $20 – $500 Credit Limit per pay period. Your Credit Limit and Maximum Available Advance will be displayed to you within the Chime app. MyPay is currently only available to eligible Chime members in certain states. Other restrictions may apply.

43. Not affiliated with Empower Annuity Insurance Company of America (www.empower.com). Not everyone will qualify. Offers range from $10-$300 for first-time customers; $10-$400 for all others. Offers are based on our eligibility requirements and can go up with on-time payments. In Feb 2025, the average offer was $95 for first-time customers; $187 for all others. Instant delivery is optional—see fees in Empower’s Terms. Empower offers a 14-day trial for first-time customers followed by an auto-recurring $8/month subscription fee. Cancel anytime.

* EarnIn is not available for Connecticut residents

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor's credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor's degree in journalism and an MBA.

Email Read more

How to Refinance a Car Loan

Key takeaways

Jump to:

What does refinancing a car mean?