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How Often Can You Refinance Your Car?

Updated on:
Content was accurate at the time of publication.

How often can you refinance your car? The short answer: as often as you like. There’s no legal limit.

However, you’ll have to find a lender willing to lend you the money. And just because you can refinance your car multiple times doesn’t mean it’s a good idea for you. To make refinancing your car worthwhile, you should look for a lower interest rate or lower monthly payment. Be careful that fees and interest don’t eat up any savings you may gain.

How many times can you refinance your car loan?

There’s no definitive number for how many times you can refinance; the real question is whether you should. With each auto loan refinance, it’s important to weigh the costs and benefits to ensure you’re getting a good deal.

You may have to pay loan origination and title transfer fees for each refinance loan. Those fees can erode the savings you gain from a lower interest rate. Each time you refinance, you’ll likely have to qualify with a new lender, as most lenders won’t refinance their own loans.

 How long should you wait before refinancing your car loan?

Technically, you can refinance your car loan almost immediately. There is no legal waiting period before refinancing an auto loan. You could get financing from the dealer to take advantage of an automaker’s cash rebate, then turn around and secure new financing at a lower rate from your bank, credit union or online lender.

However, you should wait until the dealer and your state’s department of motor vehicles have processed the title and other paperwork after the purchase, which typically takes several weeks. In the meantime, you could start shopping for a refinance loan with the terms you need.

If you have a solid credit, it will be easier to refinance your car and receive favorable terms. If you need to refinance with bad credit, you may need to show that you can make payments on time and in full for a few months before being able to qualify for refinancing.

When is it smart to refinance your car loan?

You may consider refinancing if your circumstances have changed since you took out the original loan. Perhaps you landed a new job with higher pay, improving your debt-to-income ratio so you can qualify for a better interest rate. Or maybe you lost your job or are earning less money and may need to refinance for a longer term and lower payment

Consider all the factors, including bank and title fees and the overall amount you will spend on the car, including interest. Use an auto refinancing calculator to crunch the numbers for your financial situation.

It can be tricky to determine the best time to refinance your car, but here’s when it may be smart to refinance and when it’s best to wait:

Refinancing makes sense if…

  You need a lower monthly payment. You may be able to lower your monthly car payment by qualifying for a lower annual percentage rate (APR) or selecting a longer term. Remember that a longer loan term may mean you’ll pay more in interest over the life of the loan. If your financial situation improves, you could put more money toward the loan principal (if there’s no prepayment penalty) to pay off the loan early.

  You could get a lower rate. Maybe your credit score has improved, loan rates have dropped or you went with dealer financing and got stuck with a high APR. If you can qualify for a lower interest rate, refinancing might be a good deal.

  You hate your current lender. If you got stuck with a high rate or you’re dissatisfied with the customer service you’ve received, refinancing with another lender might be a good option.

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Refinancing may not make sense if…

  You’ll lose money. Before you refinance, take a look at the big picture. Your current loan could have a prepayment penalty, and a refinance loan may come with fees for loan origination, processing, and title transfers. These fees may end up costing you more than you’d save. If you save $500 on interest by refinancing but the fees add up to $550, you’d lose money on the deal.

Don’t forget to consider any add-ons and how refinancing will affect them. If you’ve paid for guaranteed asset protection (GAP) coverage, for example, it may not transfer to the new loan. You’d have to buy it again, increasing your total out-of-pocket cost.

  Your car is too old. Most lenders have limits on the age or mileage of the cars they will finance, commonly 10 years and 100,000 miles. You may struggle to find a lender willing to refinance an older, high-mileage car. If you find yourself in a situation where refinancing is necessary, consider taking out a personal loan as an alternative option.

Why should you avoid refinancing multiple times?

Refinancing is not a bad idea overall, but refinancing repeatedly could be.

  • It can lower your credit score. The lender will run a hard credit inquiry to approve your application for an auto refinance loan, which can lower your credit score. Hard inquiries can have a negative effect on your credit score for about a year, so refinancing multiple times could really drag down your score.
  • You could become “upside down” in your loan. With a longer loan term, you run the risk of owing more than the car is worth, which is called being upside down on your loan. An upside down car loan can create problems if you want to sell or trade in the car.
  • You may pay more in the long run. If you keep extending your auto loan, the interest charges are likely to add up to more than what you would have paid on the original loan.
  • Fees may cancel out any savings. Lenders charge loan origination and processing fees, and state agencies may charge fees to transfer the title. Depending on the costs associated, these fees could wipe out any savings you’d gained from refinancing.

Alternatives to refinancing your car

If you can’t afford your monthly payments, there are other ways to get out of your car loan without refinancing.

 Modify your loan agreement

If you’re having trouble making payments, call your lender’s loss mitigation department. They may be able to change your existing agreement to make the loan more affordable so you can avoid car repossession.

 Trade your car in for a cheaper option

Rather than refinancing multiple times, you could trade in your car for a cheaper vehicle. You will have to pay off the balance of the loan or add the remaining balance to your new car loan.

 Sell your car

Consider selling the car yourself and buying a less expensive one. Ask your lender for your payoff amount, which is how much you’d need to make from the sale to repay your loan. Selling a car when you still have a loan can take a little legwork, but it may be the best option for getting out of an unaffordable loan.