Can I Refinance My Car With the Same Lender?
- Some banks will let you refinance an internal auto loan, while others won’t.
- Refinancing can lower your monthly payments or interest rates, but that doesn’t mean it will always save you money over the life of your loan.
- If you refinance with a shorter loan term, you’re more likely to save money over the course of your loan.
- After you get a quote from your current lender, shop around to be sure you’re getting the best rates and terms for your situation.
Can you refinance a car loan with the same bank?
You can refinance a car loan with the same bank, but it’s going to depend on your lender. Some lenders – like PenFed Credit Union – do not refinance their own auto loans, while many others do. Your bank may have mileage restrictions or require you to make a certain number of payments before you can refinance.
The best way to learn whether you can refinance your car with your current lender is to check out their website or give them a call.
Your original auto lender may be able to offer the best terms on an auto loan refinance, but it’s also possible that you’ll find a better deal elsewhere. Before you shop around, read our tips for avoiding common car refinancing mistakes.
What does refinancing a car mean?
When you refinance a car, you exchange your current car loan for a new loan with different terms, rates and monthly payment amounts. Usually, people seeking an auto loan refinance are interested in one or more of the following:
- Lower monthly payments
- Lower interest rates
- New repayment terms
If you’re refinancing to save on monthly costs, be aware that lower monthly payments are often achieved by lengthening your loan term. Even if you lower your interest rate and your monthly payments, there’s a chance you could end up paying more in interest over the life of your loan, thanks to repaying it over a longer period of time.
Conversely, if you secure a lower rate and a shorter loan term, you could save big over the life of your auto loan – even if your monthly payments go up a bit.
You can save an average of $1,346 over the life of your car loan if you refinance, according to a LendingTree study. Americans who shorten their repayment term can save even more — $6,291 on average.
How does refinancing a car work?
We recommend following these steps to get the best rates when you refinance your car:
- Read the terms of your current loan to make sure you won’t need to pay a prepayment penalty when you exchange your existing loan for a new one.
- Shop around. Get a quote from your current lender and several additional lenders to ensure that you get the best rates and terms for your current financial situation.
- Compare quotes. Use an auto refinance calculator to determine which refinancing offer will help you save the most money over time.
- Submit your application for auto refinance. The steps you’ll take when you apply for a car refinance loan will be similar to the ones you took when you applied for your first auto loan. Once you’re approved, the new loan will replace your existing one, and you’ll start paying off the new loan according to the updated terms.
When should I refinance my car?
There are two good times to refinance a car: if you can get a better (lower-cost) loan, or if you need a more affordable monthly payment.
You want a better loan
If your goal is to pay less on your loan over time, refinancing may help. You’re most likely to get optimal outcomes if one or more of the following have happened since you took out your original loan – and you take on a shorter loan term:
- Interest rates have dropped
- Your credit improved
- Your car gained equity (meaning the value of your car is greater than your loan balance)
This last situation is not as common. Cars are depreciating assets, with new vehicles losing 20% of their value within the first year. By the time you hit year five, most vehicles lose up to 55% of their value.
There’s a chance that if you have positive equity, you’re pretty far into your loan term. At this point, the amortization on auto loans means you’re not paying as much in interest, anyway – a larger portion of your monthly payments is going towards the principal balance.
You can’t afford the monthly payments
If your budget is tight, refinancing may give you some breathing room. It might allow you to decrease your monthly payments with a lower interest rate – especially when you stretch out your loan repayment over a longer period. Just note that you’ll pay more interest over the life of the loan with a longer repayment period, increasing your total cost to borrow.
If you have dealer-backed financing, you might also get a more affordable loan by refinancing through a bank or credit union.
Is refinancing a car worth it?
Refinancing a car can be worth it if you secure better terms that help you afford your current monthly payment or pay less on your loan over time.
You could find a lower rate
Each lender has a unique range of APRs based on several variables. Shopping around for a car refinance loan can help you discover the lowest rates available for your vehicle, your credit scores and your financial situation. You may even be able to use low-rate quotes to help you negotiate a better deal with your original lender.
You could qualify for better terms
Lower interest rates aren’t the only reason to refinance your car. Shorter auto loans can save you money in interest payments over the course of your loan. Plus, some lenders offer unique refinancing terms, including extra-long repayment periods (if you need lower monthly payments and are okay paying more in interest), or a 60- to 90-day grace period before your first payment is due.
Frequently asked questions
You can refinance your car loan as long as you meet your lender’s requirements. You’re more likely to qualify for refinancing if you have good credit and your car is less than 10 years old.
When you refinance, the new loan replaces your old loan. The refinance loan will pay off the original loan, and you’ll begin making payments on the new account.
Each application for an auto refinance loan can drop your credit scores – usually by up to five points. But according to FICO, when you submit all of your applications within a rate-shopping window, it will only count as a single hit to your credit score. This window is either 14 or 45 days, depending on whether a lender uses an older FICO score model or a newer version.
You can also minimize credit damage by applying with lenders that do a soft credit pull rather than a hard credit inquiry when you ask for a rate quote.
If you have bad credit, you may have limited opportunities to refinance your car. Not all lenders offer auto refinancing for bad credit, so your best bet is to check with your lender and consider shopping around. You may qualify for lower rates if you take the time to improve your credit score before applying for auto refinancing.
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