Best Refinance Auto Loans for 2020

If you purchased a car and financed it for several years, a lot may have changed since you bought it. Your credit may have improved or interest rates went down, which means the lowest auto finance rates are available to you. Or changes in your income or budget mean that you can’t afford your monthly car payment and refinancing an auto loan to save money is vital.

The Simple Dollar SimpleScore is designed to help you find the best places to refinance auto loans. We evaluated features such as interest rates, fees, loan lengths and car restrictions from a variety of auto refinance lenders to help you search for the best places to refinance an auto loan.

Auto Loan Express

Auto Loan Express
Min. Loan Fixed APR Term
N/A N/A 24 - 72 months
LEARN MORE

on lender's secure website

Auto Loan Express

Auto Loan Express
Min. Loan Fixed APR Term
N/A N/A 24 - 72 months
LEARN MORE

on lender's secure website

CarsDirect

CarsDirect
Min. Loan Fixed APR Term
N/A 3.00% - 12.90% 24 - 72 months
LEARN MORE

on lender's secure website

CarsDirect

CarsDirect
Min. Loan Fixed APR Term
N/A 3.00% - 12.90% 24 - 72 months
LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 4.99% - 10.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 3.49% - 9.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 3.49% - 9.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 3.49% - 9.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

MyAutoLoan

MyAutoLoan
Min. Loan Fixed APR Term
$7,500 3.49% - 18.03% 24 to 72 months
LEARN MORE

on lender's secure website

MyAutoLoan

MyAutoLoan
Min. Loan Fixed APR Term
$7,500 1.79% - 21.03% 24 - 72 months
LEARN MORE

on lender's secure website

MyAutoLoan

MyAutoLoan
Min. Loan Fixed APR Term
$7,500 3.74% - 18% 24 to 72 months
LEARN MORE

on lender's secure website

Penfed

Penfed
Min. Loan Fixed APR Term
$500 2.14% - 6.29% 1 - 7 years
LEARN MORE

on lender's secure website

Penfed

Penfed
Min. Loan Fixed APR Term
$500 1.39% - 2.49% 36 - 72 months
LEARN MORE

on lender's secure website

Penfed

Penfed
Min. Loan Fixed APR Term
$500 2.24% - 3.49% 36 - 72 months
LEARN MORE

on lender's secure website

The best auto refinance loans of 2020

Auto refinancing loans at a glance

Lender APR Terms Loan Amount Key Benefits
LightStream 3.49%–10.49% 24–84 months $5,000–$100,000 Low refinance amount
LendingClub 10.68%–35.89% 24–84 months $5,000–$55,000 Compare two refinance offers
Capital One 4.07%–24.99% 24–84 months $7,500–$50,000 No credit check for rate
Bank of America As low as 3.69% 12–75 months $7,500–$100,000 Fast decision/rate lock
US Bank As low as 3.09% 24–84 months $10,000–$100,000 Online application available
AutoPay As low as 1.99% 24–84 months $2,500–$100,000 Compare multiple refinance offers

Best overall – LighStream

LightStream

Auto refinancing for good credit applicants with no fees, no appraisals, no fuss.

Rates
3.49%–10.49%
Terms
24–84 months
J.D. Power
3/5
SimpleScore
4.6 / 5.0
close
SimpleScore
LightStream
4.6
  • Rates
    5
  • Vehicle Restrictions
    5
  • Terms
    5
  • Customer Satisfaction
    3
  • Fees
    5
Got good credit? Then use it. LightStream will refinance your auto loan at a great rate and no fees if your FICO score is 660 or higher. Borrowers with good credit get plenty of perks from the loan division of SunTrust Bank/Truist. Having good credit means you won’t need to have your car appraised and don’t have to worry about the age or miles of the car. Once you’re approved, you’re on your way to saving money on your monthly payments without all the fuss other borrowers have to deal with.
Full review

Our Two Cents — Don’t play around with an interest rate check and go in committed — LightStream does a hard pull, which will drop your credit score just a bit.

Best P2P lender – Lending Club

LendingClub

Skip the bank loan and work with an investor willing to lend you the money you need for an auto refinance loan.

Rates
10.68%–35.89%
Terms
24 months
J.D. Power
Not Rated
SimpleScore
3.25 / 5.0
close
SimpleScore
LendingClub
3.25
  • Rates
    3
  • Vehicle Restrictions
    1
  • Terms
    5
  • Customer Satisfaction
    N/A
  • Fees
    4
Peer-to-peer lending is an alternative way to borrow. Apply for an auto refinance loan and LendingClub will present it to its marketplace of individuals willing to offer loans in exchange for earning some interest on their money. You’ll get back two refinance offers to choose from. The higher your credit score, the lower the risk to the lender — and the lower your interest rate. If you have a lower FICO, you’ll probably qualify for a loan, but don’t expect the best interest rate.
Full review

Our Two Cents — LendingClub is the Match.com of auto refinance loans — let the platform introduce you to two new lending candidates to choose from.

Best online portal – Capital One

Capital One

Prequalify for an auto refinance to know how much the loan will cost you with no effect to your credit.

Rates
4.07%–24.99%
Terms
24–84 months
J.D. Power
4/5
SimpleScore
4.6 / 5.0
close
SimpleScore
Capital One
4.6
  • Rates
    4
  • Vehicle Restrictions
    5
  • Terms
    5
  • Customer Satisfaction
    4
  • Fees
    5
Capital One makes the auto refinance process simple. Enter your information to prequalify for an auto refi to see what type of loan you can get. You’ll get an accurate picture of interest rate and monthly payments depending on the loan length. The good news is, doing so won’t affect your credit score — the lender won’t do a hard check until you’re officially ready to move forward. You won’t have to worry about any fees when you refinance. Capital One doesn’t charge any and already factored any state title transfer fees into your loan cost when you prequalified.
Full review

Our Two Cents — Try before you buy with no effect to your credit score — get prequalified for an accurate interest rate and monthly payment to decide without obligation.

Best for existing customers – Bank of America

Bank of America

Take advantage of an existing banking relationship to get a better rate on your auto refinance.

Rates
As low as 3.69%
Terms
48–72 months
J.D. Power
3/5
SimpleScore
3.4 / 5.0
close
SimpleScore
Bank of America
3.4
  • Rates
    4
  • Vehicle Restrictions
    3
  • Terms
    3
  • Customer Satisfaction
    3
  • Fees
    4
Bank of America makes it possible to refinance your car fast — BofA claims you’ll get an answer in just 60 seconds. The bank has plenty of online resources and a car loan calculator to figure out how much your refi will cost you each month. But all the online features don't hide the fact that you’re working with a traditional lender — qualifying for a refinance may be a challenge if you have a lower credit score. If you already have an account with the bank, your odds may be better and the Preferred Rewards program could earn you a discount on the interest rate.
Full review

Our Two Cents — Ordering a latte at Starbucks takes longer than getting approved for an auto refinance with Bank of America.

Best for short-term refinance – US Bank

US Bank

Save money on your auto loan refinance when you go with a shorter-term loan from US Bank.

Rates
As low as 3.09%
Terms
Up to 36 months
J.D. Power
2/5
SimpleScore
3.4 / 5.0
close
SimpleScore
US Bank
3.4
  • Rates
    4
  • Vehicle Restrictions
    5
  • Terms
    3
  • Customer Satisfaction
    2
  • Fees
    3
Customers that already bank with US Bank and would like the convenience factor of having their loans with their bank would be good candidates for a US Bank auto refinance. Regardless of the reasons for choosing US Bank, the best rates come with shorter refinances. If you can afford a shorter term, you may be able to offset the monthly cost by the interest rate savings.
Full review

Our Two Cents — Commitment-phobes will be rewarded with savings on their auto refinance when they opt for a shorter-term loan.

Best lender martketplace – Autopay

AutoPay

Shop your refinance around, even with poor credit, through AutoPay’s lending marketplace.

Rates
As low as 1.99%
Terms
24–84 months
J.D. Power
Not Rated
SimpleScore
4.5 / 5.0
close
SimpleScore
AutoPay
4.5
  • Rates
    5
  • Vehicle Restrictions
    3
  • Terms
    5
  • Customer Satisfaction
    N/A
  • Fees
    5
AutoPay makes comparing auto refinance offers a one-stop deal. You’ll get a variety of refi loan offers from banks, credit unions, and other lenders. AutoPay’s impressive 1.99% is saved for people with excellent credit, but the lending marketplace labels itself as credit-score friendly. Even if you have a fair to low credit score, you’ll likely receive offers, albeit at a higher interest rate.
Full review

Our Two Cents — Best for those with FOMO (fear of missing out) — you’ll get several auto refinance offers to choose from.

What is an auto refinancing loan?

An auto refinancing loan replaces your current car loan with a new one. While there are many reasons why someone may want to refinance their existing automobile loan with a different one, the main reason is to take advantage of a lower interest rate to save money on the monthly auto loan payments. You’re free to refinance — most banks allow you to change lending institutions without prepayment or early cancellation penalties, making a refinance loan a viable idea if a better loan offer comes along.

[Read: Should You Ever Refinance an Auto Loan?]

How auto loan refinancing works

Refinancing a vehicle loan could put cash back in your pocket if you can lower your monthly payments or pay your loan off faster. An auto refinance works similar to a loan, except the new lender pays off the old lender. You’ll need to apply for the loan by showing you have good credit and a solid repayment history. The process, in simple terms works like this:

  • You research to find out if the lender may have restrictions on the type of vehicle, age, and mileage.
  • You apply to prequalify for a loan to know what your new interest rate will be.
  • You play around with the term length to find the ideal monthly payment and loan cost.
  • Once you agree, you formally apply for the loan, providing information on your vehicle and yourself.
  • The lender will perform a credit check and potentially appraise the vehicle.
  • Once you’re approved, your new lender will pay the old lender in full for the loan.
  • You continue your car loan payments to your new lender, hopefully saving money.

[More: The Simple Dollar Guide to Auto Loans]

New terms

Terms in the world of loans and finance stands for the length of your loan. For example, a term of 36 months means a loan length of 36 months. An auto refinance may come with new terms of your choice. If you refinanced to save money, you may keep the same time period as before, but with a lower interest rate to save money on interest. Or you could go with longer terms to stretch out payments for a lower monthly bill. Or you could go with a shorter term than before to pay your loan off faster.

New rates

The largest motivating factor for a car refinance is to take advantage of a lower interest rate. If you’ve been paying off an 84-month car loan for the last couple of years, interest rates may have dramatically dropped since then. Or perhaps your credit score is better today after two years of on-time payments. In both scenarios, it may be a good time to refinance your auto loan for a lower interest rate.

Vehicle restrictions

When you’re planning on refinancing your auto loan, the lender may have limitations about the type of vehicle they’d be willing to accept a refinance for. The most typical restrictions include age, mileage, car value, and type of vehicle. Most lenders will only refinance a non-commercial vehicle for personal use that’s worth more than the loan. In addition, lenders prefer to provide a loan on a newer car, usually seven to 10 years or newer, and with a limited amount of miles.

Check Your Personal Loan Rates

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

How to choose the best auto refinancing loan for you

Choosing the best auto refinance loan for your needs requires a little research and analysis. Let’s break it down into a few steps:

  1. Calculate the current value of your car by using the Kelley Blue Book car valuation tool. Knowing your car’s value is important — some lenders may not refinance a car with a value lower than what’s left on the loan.
  2. Do a review of your credit score by ordering a free annual credit report and looking for any errors that could be affecting your score.
  3. Visit a few lender’s websites for information about refinances, car restrictions and current interest rates.
  4. Apply for a prequalification, ensuring the lender will not do a hard pull on your credit. Hard pulls may affect your credit score. Look for auto refi lenders that only do a soft pull to quote you on your refinance cost.
  5. Decide on whether you’d like to pay the loan off sooner to save money on your interest payments, or you’d like a longer loan, which is not advisable unless you’re really struggling with your car payment.
  6. Compare the offers you’ve rounded up to decide on the best car refinance for your personal needs.
  7. Go back to the lender and formalize the prequalification to refinance your auto loan.

Auto loan refinancing FAQs

When should I refinance my auto loan?

If interest rates dropped enough where refinancing your auto loan could save you a significant amount of money on your auto loan. It all depends on what you’re comfortable with. If your current monthly payment is $475 per month and refinancing for the same amount of time left comes in at $410 per month, refinancing to save $65 per month is worth it.

Why are there vehicle restrictions?

Lenders set restrictions on the type of vehicle they’re willing to finance. Some of the conditions include newer vehicles, ones with higher value, low mileage autos, or cars for personal use only. Lenders are looking out for their investment by ensuring the car you’re refinancing is valuable enough for you to want to continue paying your loan off.

Should I refinance to lower my payments or shorten the loan?

Refinancing to shorten your loan (if you can realistically afford it) may be in your best interest to get out of debt faster. You’ll not only save on interest from making fewer payments, but you’ll free up a significant amount of money from your monthly spending sooner. Refinancing your loan to lower your payments is advisable if the interest rate is low enough to make your monthly payments lower without changing the time left on your loan. If you’re refinancing to pay less by extending your payments for longer, you should evaluate how else you could make up for the shortfall instead of lengthening the time it takes to pay for your car.

Too long, didn’t read?

A refinancing auto loan is a good option if you can get better terms from a different lender. Being able to save money on your loan and shorten the length you’re in debt is almost always a good idea. Not all auto refinance lenders are alike. Some are geared to good credit customers only, while others provide bad credit auto refinance loans. Do your research and compare lenders to find the best auto refi lender for you.

Keep reading

Methodology

The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For auto refinance loans, we compared interest rates, vehicle restrictions, terms, customer satisfaction and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing an auto refinance loan provider. Be sure to continue your research and shop around for the best auto refinance loan that fits your specific needs.

We welcome your feedback on this article and would love to hear about your experience with the auto refinance loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Cynthia Paez Bowman
Cynthia Paez Bowman
Contributing Writer

Cynthia Paez Bowman is a finance, real estate and international business journalist. Her work has been featured in Business Jet Traveler, MSN, CheatSheet.com, Bankrate.com and Freshome.com. She owns and operates a small digital marketing and public relations firm that works with select startups and women-owned businesses to provide growth and visibility. Cynthia splits her time between Los Angeles, California, and San Sebastian, Spain. She travels to Africa and the Middle East regularly to consult with women’s NGOs about small business development

Reviewed by

  • Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.

Best Refinance Auto Loans for 2020

If you purchased a car and financed it for several years, a lot may have changed since you bought it. Your credit may have improved or interest rates went down, which means the lowest auto finance rates are available to you. Or changes in your income or budget mean that you can’t afford your monthly car payment and refinancing an auto loan to save money is vital.

The Simple Dollar SimpleScore is designed to help you find the best places to refinance auto loans. We evaluated features such as interest rates, fees, loan lengths and car restrictions from a variety of auto refinance lenders to help you search for the best places to refinance an auto loan.

Auto Loan Express

Auto Loan Express
Min. Loan Fixed APR Term
N/A N/A 24 - 72 months
LEARN MORE

on lender's secure website

Auto Loan Express

Auto Loan Express
Min. Loan Fixed APR Term
N/A N/A 24 - 72 months
LEARN MORE

on lender's secure website

CarsDirect

CarsDirect
Min. Loan Fixed APR Term
N/A 3.00% - 12.90% 24 - 72 months
LEARN MORE

on lender's secure website

CarsDirect

CarsDirect
Min. Loan Fixed APR Term
N/A 3.00% - 12.90% 24 - 72 months
LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 4.99% - 10.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 3.49% - 9.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 3.49% - 9.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

LightStream

LightStream
Min. Loan Fixed APR Term
$5,000 3.49% - 9.49%

LightStream Disclosure

24 - 84 months

LightStream Disclosure

LEARN MORE

on lender's secure website

MyAutoLoan

MyAutoLoan
Min. Loan Fixed APR Term
$7,500 3.49% - 18.03% 24 to 72 months
LEARN MORE

on lender's secure website

MyAutoLoan

MyAutoLoan
Min. Loan Fixed APR Term
$7,500 1.79% - 21.03% 24 - 72 months
LEARN MORE

on lender's secure website

MyAutoLoan

MyAutoLoan
Min. Loan Fixed APR Term
$7,500 3.74% - 18% 24 to 72 months
LEARN MORE

on lender's secure website

Penfed

Penfed
Min. Loan Fixed APR Term
$500 2.14% - 6.29% 1 - 7 years
LEARN MORE

on lender's secure website

Penfed

Penfed
Min. Loan Fixed APR Term
$500 1.39% - 2.49% 36 - 72 months
LEARN MORE

on lender's secure website

Penfed

Penfed
Min. Loan Fixed APR Term
$500 2.24% - 3.49% 36 - 72 months
LEARN MORE

on lender's secure website

The best auto refinance loans of 2020

Auto refinancing loans at a glance

Lender APR Terms Loan Amount Key Benefits
LightStream 3.49%–10.49% 24–84 months $5,000–$100,000 Low refinance amount
LendingClub 10.68%–35.89% 24–84 months $5,000–$55,000 Compare two refinance offers
Capital One 4.07%–24.99% 24–84 months $7,500–$50,000 No credit check for rate
Bank of America As low as 3.69% 12–75 months $7,500–$100,000 Fast decision/rate lock
US Bank As low as 3.09% 24–84 months $10,000–$100,000 Online application available
AutoPay As low as 1.99% 24–84 months $2,500–$100,000 Compare multiple refinance offers

Best overall – LighStream

LightStream

Auto refinancing for good credit applicants with no fees, no appraisals, no fuss.

Rates
3.49%–10.49%
Terms
24–84 months
J.D. Power
3/5
SimpleScore
4.6 / 5.0
close
SimpleScore
LightStream
4.6
  • Rates
    5
  • Vehicle Restrictions
    5
  • Terms
    5
  • Customer Satisfaction
    3
  • Fees
    5
Got good credit? Then use it. LightStream will refinance your auto loan at a great rate and no fees if your FICO score is 660 or higher. Borrowers with good credit get plenty of perks from the loan division of SunTrust Bank/Truist. Having good credit means you won’t need to have your car appraised and don’t have to worry about the age or miles of the car. Once you’re approved, you’re on your way to saving money on your monthly payments without all the fuss other borrowers have to deal with.
Full review

Our Two Cents — Don’t play around with an interest rate check and go in committed — LightStream does a hard pull, which will drop your credit score just a bit.

Best P2P lender – Lending Club

LendingClub

Skip the bank loan and work with an investor willing to lend you the money you need for an auto refinance loan.

Rates
10.68%–35.89%
Terms
24 months
J.D. Power
Not Rated
SimpleScore
3.25 / 5.0
close
SimpleScore
LendingClub
3.25
  • Rates
    3
  • Vehicle Restrictions
    1
  • Terms
    5
  • Customer Satisfaction
    N/A
  • Fees
    4
Peer-to-peer lending is an alternative way to borrow. Apply for an auto refinance loan and LendingClub will present it to its marketplace of individuals willing to offer loans in exchange for earning some interest on their money. You’ll get back two refinance offers to choose from. The higher your credit score, the lower the risk to the lender — and the lower your interest rate. If you have a lower FICO, you’ll probably qualify for a loan, but don’t expect the best interest rate.
Full review

Our Two Cents — LendingClub is the Match.com of auto refinance loans — let the platform introduce you to two new lending candidates to choose from.

Best online portal – Capital One

Capital One

Prequalify for an auto refinance to know how much the loan will cost you with no effect to your credit.

Rates
4.07%–24.99%
Terms
24–84 months
J.D. Power
4/5
SimpleScore
4.6 / 5.0
close
SimpleScore
Capital One
4.6
  • Rates
    4
  • Vehicle Restrictions
    5
  • Terms
    5
  • Customer Satisfaction
    4
  • Fees
    5
Capital One makes the auto refinance process simple. Enter your information to prequalify for an auto refi to see what type of loan you can get. You’ll get an accurate picture of interest rate and monthly payments depending on the loan length. The good news is, doing so won’t affect your credit score — the lender won’t do a hard check until you’re officially ready to move forward. You won’t have to worry about any fees when you refinance. Capital One doesn’t charge any and already factored any state title transfer fees into your loan cost when you prequalified.
Full review

Our Two Cents — Try before you buy with no effect to your credit score — get prequalified for an accurate interest rate and monthly payment to decide without obligation.

Best for existing customers – Bank of America

Bank of America

Take advantage of an existing banking relationship to get a better rate on your auto refinance.

Rates
As low as 3.69%
Terms
48–72 months
J.D. Power
3/5
SimpleScore
3.4 / 5.0
close
SimpleScore
Bank of America
3.4
  • Rates
    4
  • Vehicle Restrictions
    3
  • Terms
    3
  • Customer Satisfaction
    3
  • Fees
    4
Bank of America makes it possible to refinance your car fast — BofA claims you’ll get an answer in just 60 seconds. The bank has plenty of online resources and a car loan calculator to figure out how much your refi will cost you each month. But all the online features don't hide the fact that you’re working with a traditional lender — qualifying for a refinance may be a challenge if you have a lower credit score. If you already have an account with the bank, your odds may be better and the Preferred Rewards program could earn you a discount on the interest rate.
Full review

Our Two Cents — Ordering a latte at Starbucks takes longer than getting approved for an auto refinance with Bank of America.

Best for short-term refinance – US Bank

US Bank

Save money on your auto loan refinance when you go with a shorter-term loan from US Bank.

Rates
As low as 3.09%
Terms
Up to 36 months
J.D. Power
2/5
SimpleScore
3.4 / 5.0
close
SimpleScore
US Bank
3.4
  • Rates
    4
  • Vehicle Restrictions
    5
  • Terms
    3
  • Customer Satisfaction
    2
  • Fees
    3
Customers that already bank with US Bank and would like the convenience factor of having their loans with their bank would be good candidates for a US Bank auto refinance. Regardless of the reasons for choosing US Bank, the best rates come with shorter refinances. If you can afford a shorter term, you may be able to offset the monthly cost by the interest rate savings.
Full review

Our Two Cents — Commitment-phobes will be rewarded with savings on their auto refinance when they opt for a shorter-term loan.

Best lender martketplace – Autopay

AutoPay

Shop your refinance around, even with poor credit, through AutoPay’s lending marketplace.

Rates
As low as 1.99%
Terms
24–84 months
J.D. Power
Not Rated
SimpleScore
4.5 / 5.0
close
SimpleScore
AutoPay
4.5
  • Rates
    5
  • Vehicle Restrictions
    3
  • Terms
    5
  • Customer Satisfaction
    N/A
  • Fees
    5
AutoPay makes comparing auto refinance offers a one-stop deal. You’ll get a variety of refi loan offers from banks, credit unions, and other lenders. AutoPay’s impressive 1.99% is saved for people with excellent credit, but the lending marketplace labels itself as credit-score friendly. Even if you have a fair to low credit score, you’ll likely receive offers, albeit at a higher interest rate.
Full review

Our Two Cents — Best for those with FOMO (fear of missing out) — you’ll get several auto refinance offers to choose from.

What is an auto refinancing loan?

An auto refinancing loan replaces your current car loan with a new one. While there are many reasons why someone may want to refinance their existing automobile loan with a different one, the main reason is to take advantage of a lower interest rate to save money on the monthly auto loan payments. You’re free to refinance — most banks allow you to change lending institutions without prepayment or early cancellation penalties, making a refinance loan a viable idea if a better loan offer comes along.

[Read: Should You Ever Refinance an Auto Loan?]

How auto loan refinancing works

Refinancing a vehicle loan could put cash back in your pocket if you can lower your monthly payments or pay your loan off faster. An auto refinance works similar to a loan, except the new lender pays off the old lender. You’ll need to apply for the loan by showing you have good credit and a solid repayment history. The process, in simple terms works like this:

  • You research to find out if the lender may have restrictions on the type of vehicle, age, and mileage.
  • You apply to prequalify for a loan to know what your new interest rate will be.
  • You play around with the term length to find the ideal monthly payment and loan cost.
  • Once you agree, you formally apply for the loan, providing information on your vehicle and yourself.
  • The lender will perform a credit check and potentially appraise the vehicle.
  • Once you’re approved, your new lender will pay the old lender in full for the loan.
  • You continue your car loan payments to your new lender, hopefully saving money.

[More: The Simple Dollar Guide to Auto Loans]

New terms

Terms in the world of loans and finance stands for the length of your loan. For example, a term of 36 months means a loan length of 36 months. An auto refinance may come with new terms of your choice. If you refinanced to save money, you may keep the same time period as before, but with a lower interest rate to save money on interest. Or you could go with longer terms to stretch out payments for a lower monthly bill. Or you could go with a shorter term than before to pay your loan off faster.

New rates

The largest motivating factor for a car refinance is to take advantage of a lower interest rate. If you’ve been paying off an 84-month car loan for the last couple of years, interest rates may have dramatically dropped since then. Or perhaps your credit score is better today after two years of on-time payments. In both scenarios, it may be a good time to refinance your auto loan for a lower interest rate.

Vehicle restrictions

When you’re planning on refinancing your auto loan, the lender may have limitations about the type of vehicle they’d be willing to accept a refinance for. The most typical restrictions include age, mileage, car value, and type of vehicle. Most lenders will only refinance a non-commercial vehicle for personal use that’s worth more than the loan. In addition, lenders prefer to provide a loan on a newer car, usually seven to 10 years or newer, and with a limited amount of miles.

Check Your Personal Loan Rates

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

How to choose the best auto refinancing loan for you

Choosing the best auto refinance loan for your needs requires a little research and analysis. Let’s break it down into a few steps:

  1. Calculate the current value of your car by using the Kelley Blue Book car valuation tool. Knowing your car’s value is important — some lenders may not refinance a car with a value lower than what’s left on the loan.
  2. Do a review of your credit score by ordering a free annual credit report and looking for any errors that could be affecting your score.
  3. Visit a few lender’s websites for information about refinances, car restrictions and current interest rates.
  4. Apply for a prequalification, ensuring the lender will not do a hard pull on your credit. Hard pulls may affect your credit score. Look for auto refi lenders that only do a soft pull to quote you on your refinance cost.
  5. Decide on whether you’d like to pay the loan off sooner to save money on your interest payments, or you’d like a longer loan, which is not advisable unless you’re really struggling with your car payment.
  6. Compare the offers you’ve rounded up to decide on the best car refinance for your personal needs.
  7. Go back to the lender and formalize the prequalification to refinance your auto loan.

Auto loan refinancing FAQs

When should I refinance my auto loan?

If interest rates dropped enough where refinancing your auto loan could save you a significant amount of money on your auto loan. It all depends on what you’re comfortable with. If your current monthly payment is $475 per month and refinancing for the same amount of time left comes in at $410 per month, refinancing to save $65 per month is worth it.

Why are there vehicle restrictions?

Lenders set restrictions on the type of vehicle they’re willing to finance. Some of the conditions include newer vehicles, ones with higher value, low mileage autos, or cars for personal use only. Lenders are looking out for their investment by ensuring the car you’re refinancing is valuable enough for you to want to continue paying your loan off.

Should I refinance to lower my payments or shorten the loan?

Refinancing to shorten your loan (if you can realistically afford it) may be in your best interest to get out of debt faster. You’ll not only save on interest from making fewer payments, but you’ll free up a significant amount of money from your monthly spending sooner. Refinancing your loan to lower your payments is advisable if the interest rate is low enough to make your monthly payments lower without changing the time left on your loan. If you’re refinancing to pay less by extending your payments for longer, you should evaluate how else you could make up for the shortfall instead of lengthening the time it takes to pay for your car.

Too long, didn’t read?

A refinancing auto loan is a good option if you can get better terms from a different lender. Being able to save money on your loan and shorten the length you’re in debt is almost always a good idea. Not all auto refinance lenders are alike. Some are geared to good credit customers only, while others provide bad credit auto refinance loans. Do your research and compare lenders to find the best auto refi lender for you.

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Methodology

The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For auto refinance loans, we compared interest rates, vehicle restrictions, terms, customer satisfaction and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing an auto refinance loan provider. Be sure to continue your research and shop around for the best auto refinance loan that fits your specific needs.

We welcome your feedback on this article and would love to hear about your experience with the auto refinance loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.