Auto refinance Archives

How Many Times Can You Refinance a Car?

Posted on January 10, 2023January 10, 2023 by Autopay

Quick Answer:

Most people assume there is a restriction on the number of times you can refinance a car, but there is no legal limit. You can refinance your vehicle as many times as you want. However, that doesn't mean that you should refinance your car every chance you get. There are other factors to consider, such as the impact on your credit score and the amount of money you'll save.

Refinancing a car means taking out a new loan to pay off the balance of your existing loan. This can be done for various reasons, such as getting a lower interest rate or extending the loan term. While there are some advantages to refinancing, there are still some risks. For example, if you extend the duration of your loan, you pay more interest in the long run. And if you refinance multiple times, you could end up with a negative equity in your car (meaning you owe more than the car is worth).

Let’s explore why refinancing a car might be a good idea and some of the top questions people have about refinancing multiple times.

Table of Contents:

Why Would You Refinance a Car?
Why Refinance a Car Again?
Top Questions About Refinancing a Car Multiple Times
The Bottom Line on Refinancing More Than Once

Why Would You Refinance a Car?

Most people refinance their car when they can no longer afford their monthly payments or want to lower their interest rate. When you refinance your car, you take out a new loan with new terms to replace your old loan. Remember that refinancing does not eliminate your debt. Still, it may help you lower your monthly payments or save on interest. And with auto debt continuing to rise, according to the Federal Reserve Bank of New York, it’s no wonder folks are trying to find ways to lower their payments.

Man leaning out of the driver side window with his arms crossed on top of the driver's side door. The text lists reasons why car owners would refinance, which is also outlined in the following paragraph

Let’s take a closer look at these three reasons to refinance a car.

1. You can no longer afford your monthly payments. If you struggle to make your monthly car payments, refinancing may be a good option. By refinancing your car, you may be able to lower your monthly payments and free up some extra cash each month.

2. You want to lower your interest rate. If you qualify for a lower interest rate, refinancing may help you save money on interest over the life of your loan. A lower interest rate could also help you pay off your debt sooner.

3. You want to change the terms of your loan. If you originally agreed to a 60-month loan but now want to pay off your debt sooner, refinancing for a 48-month or 36-month loan could be a good option. Or, if you originally agreed to a 36-month loan but now want to lower your monthly payments, refinancing for a 60-month loan could be a good option for you.

Male hands with one holding a pen while typing on a calculator, while the other is on the keyboard of a laptop

Why Refinance a Car Again?

If you’ve already refinanced your car once, you may wonder if it’s worth refinancing again. The answer to this question depends on a few factors, such as your current interest rate, the terms of your new loan, and your financial goals.

High-Interest Rates – If you’re currently paying a high-interest rate, refinancing may help you save money on interest over the life of your loan. For example, let’s say you have a $20,000 loan with an interest rate of 15 percent. Over 60 months, you would end up paying $6,000 in interest. However, if you could refinance for a lower interest rate of 10 percent, you would only end up paying $4,000 in interest, a savings of $2,000.
Change of Loan Terms – This is no different than the first time you refinanced. If you want to change the terms of your loan, such as the length of the loan or the monthly payments, refinancing may be a good option for you.
Financial Goals – If you have other financial goals, such as saving for a down payment on a house or taking a much-needed vacation, refinancing may help you free up some extra cash each month. For example, let’s say you have a $15,000 loan with an interest rate of 10 percent and monthly payments of $350. If you refinanced for a 60-month loan with an interest rate of 15 percent, your monthly payments would decrease to $308. However, you would end up paying $3,000 more in interest over the life of the loan, but the trade-off could be worth it if you need the extra cash each month to reach your financial goals.

The Bottom Line on Refinancing More Than Once

If you’re considering refinancing your car, there’s no limit to how many times you can do it. However, keep in mind the lender’s policy on refinancing, the administrative process of title transfer, and the impact on your credit score. Refinancing can be a great way to save money on interest or change the terms of your loan, but make sure to consider all the factors before making a decision.

How Much Can Auto Loan Refinancing Save Me?

Posted on November 23, 2022November 23, 2022 by Autopay

Car and home purchases are typically the largest purchases that most people will ever make. Because of the cost of the average home or new car, most consumers take out a loan to cover all or part of the cost.

Although both types of loans can take a long time to pay off, car loan terms can range anywhere between 24 and 72 months — sometimes longer. These payments can be a drain on your finances.

If you are currently paying off an auto loan, car loan refinancing can help you save money over the length of your repayment period, in the form of lower monthly payments or both. How much money you save depends on several factors including your goals, current interest rates and your creditworthiness.

stick note with "refinance car" written on it

What Is Auto Refinancing?

Auto refinancing is the process of changing the terms of your current car loan. If your refinancing application is approved, your lender issues you a new loan that replaces the one you had. The differences are in the loan terms.

For example, you could refinance at a time when interest rates are lower than what they were when you took out your original loan, or you could qualify for a lower interest rate based on an improvement in your financial situation or credit score.

Over time, you’ll save money as you repay your balance at the lower rate. You might also be able to shorten or lengthen the amount of time over which you’ll need to make payments.

Understanding Your Savings

When considering a car loan refinance, it’s important to determine what your goals are. If you are looking to reduce the amount of money you pay over the length of your loan, you’ll either want to reduce the interest rate that you were locked into when you first entered into the auto loan financing process, reduce the number of payments left on your loan (even if it means making higher monthly payments) or both.

On the other hand, if you are dealing with financial issues and need to free up some cash every month, you might want to refinance so that the length of your auto financing agreement is longer but with smaller payments each month.

If you don’t secure an interest deduction with this type of auto loan refinance, you might pay more over time than you would have with your original financing deal. However, since your payments are smaller, you’ll have more cash each month.

Factors That Influence Savings

The amount of money that you can save depends on multiple factors, including:

Current interest rates: Current interest rates have a huge impact on the cost of your loan. If interest rates were high at the time that you signed your original contract, but have gone down since then, refinancing could save you money. However, if interest rates have gone up, it could end up costing you more money to refinance.

Your financial profile: A financial profile includes several factors that affect the loan rate and terms that a lender offers you. Credit scores are a large part of this. If your credit score has improved since you were approved for your current loan, you might find that refinancing now could get you better terms.

And although your credit does have an impact on loan approval and terms, it isn’t the only factor lenders take into consideration. Your debt-to-income ratio (DTI) and loan-to-value ratio (LTV) on your current car loan are also factored in during the approval process.

Loan length: In many cases, the fewer payments you make, the more money you save over time. However, if you are refinancing to free up cash for your monthly budget, a longer loan term might provide you with lower monthly payments.

Lender fees: Lenders often charge fees when you apply for a loan, and sometimes your current lender will charge prepayment fees if you pay off your loan early. These fees vary, but you’ll want to check with the lenders and factor them in when you are calculating the cost of refinancing your vehicle.

Car condition and mileage: Your car’s current condition and mileage also factor in when applying for an auto refinance. The better condition your car is in and the lower the mileage, the more likely you are to get better loan terms.

To get an idea of what you might be able to save, try using a refinance car loan calculator to determine what your savings and monthly payments might be. Be prepared to provide the balance left on your loan when you use one of these calculators.

Shop Around to Find the Best Auto Loan

Everyone is different, of course, so it’s worth it to do some research, run some numbers and check your options for refinancing. If you decide to apply for refinancing, make sure you shop around for lenders to find the best interest rate and loan terms. You might be able to save money long-term while also reducing your ongoing expenses.

Thinking of Refinancing Your Car? 4 Tips to Improve Your Credit for an Even Lower Rate

Posted on November 17, 2022November 18, 2022 by Autopay

Car loan refinancing can be a great way to reduce your monthly bills and save money as you pay off your car. A refinance loan is still a loan, however, so you’ll need to meet your lender’s requirements before you can be approved.

Your chances of approval, as well as getting the most favorable loan terms, depend on several factors, but your credit score and history play a big role.

Fortunately, there are many things that you can do to improve your credit before applying for auto refinancing. These include reviewing your credit reports and challenging errors, reducing your spending, keeping accounts open and not applying for new credit right before submitting your loan application.

1. Check Your Credit Reports

In a recent study on the accuracy of credit reports, one-third of study participants found errors on their reports.

These errors could result in a denial of your auto financing loan application or an approval with less favorable terms, such as a higher interest rate. (This higher rate can cost you more money over time, and you can see how much by using a refinance car loan calculator.)

Fortunately, you have the right to check your credit reports and to dispute inaccurate information. All consumers are entitled to free annual credit reports and, in many cases, can request another free report under certain circumstances.

It’s important to check your reports from all three major credit bureaus — TransUnion, Experian, Equifax — regularly, and particularly before you apply for car loan refinancing.

If you find errors, file disputes with the credit bureaus. Recheck your reports to confirm that your disputes were effective and that your credit history is accurate before beginning the refinancing process. Pay particular attention to the age of negative information on your credit reports.

If the information is more than seven years old, you might be able to have it removed. Exceptions to the seven-year rule include bankruptcies, which can remain on your reports for up to 10 years, and judgments, which, as long as they are unpaid, can stay on your report until the statute of limitations expires.

On the other hand, if you find that the negative information on your reports is accurate, there might be things you can do to address the situation. If you can, pay off your balances.

These accounts will update within a month or so, which might improve your credit score. You might also be able to work with creditors to settle your balances, which reduces your debt load but might negatively impact your credit score in other ways.

person using scissors to cut a credit card in half

2. Don’t Close Accounts

This can be a tricky one, particularly if you are very careful with your spending. Although it might seem reasonable to want to close credit accounts that you are no longer using, doing so can have a negative impact on your credit score.

Credit scoring models consider several factors, including the age of your accounts as well as the amount of available credit that you are not using. Open accounts with low or no balances positively impact your credit. In addition, older accounts also impact your credit positively, as they show that you’ve been able to maintain an account for an extended period of time.

3. Don’t Make Any Large Purchases

Because your available credit has a significant impact on your credit score, it is wise to forgo other large purchases before refinancing your car — unless, of course, you plan to pay for the purchase in cash.

Taking out new or refi loans, or running up a large credit card bill, will affect your credit and reduce your chances of approval or getting a good rate.

4. Don’t Apply for Credit

Credit applications can result in what is known as a “hard pull” on your credit reports. This means that your credit history will show that you made a credit application. This can reduce your credit score.

If auto loan refinancing is in your near future, refrain from applying for other credit products now. Even if you easily qualify for loans or credit cards, the inquiries, plus the opening of new accounts, can have a negative impact on your creditworthiness.

Be aware, however, that not all credit checks result in a hard pull or hard inquiry on your report. Some checks, also called “soft pulls,” are performed by utility companies, employers or banks that are considering you for a preapproval offer.

These do not impact your credit score. If you are unsure about whether a business or organization is performing a hard or soft inquiry, ask before you consent to a credit check.

Take Steps to Improve Your Credit Today

Getting your credit in order before applying for a refinance loan doesn’t have to be incredibly complicated, but it can take time — particularly if you must dispute information in your report or wait for your information to be updated. Planning ahead can be your best option for a successful auto loan refinance.

What Credit Score Is Needed to Refinance a Car?

Posted on October 26, 2022November 7, 2022 by Autopay

If your car payment is high or you just want to take advantage of a better interest rate, the thought of refinancing your auto loan might have crossed your mind. When your credit score is less than perfect, refinancing might seem out of reach, but this is not always the case.

Your credit score is important when refinancing your auto loan, but it’s not the only factor. Lenders look at other aspects which could improve your chances of getting approved.

How Credit Scores Affect a Car Loan

Although credit isn’t the only factor that impacts your ability to get an auto loan, it still carries a lot of weight. Lenders use your credit score to determine the likelihood that you’ll repay the loan with no issues. Your credit score is a three-digit number used to quickly communicate whether you’d be a risky borrower to lend money to.

The higher your score, this demonstrates that you’d paid off debt in the past and continue to pay your other current bills on time. Meanwhile, a lower credit score can tell just the opposite. Credit scores typically range from 300 to 850, and according to Equifax, anything above 670 is considered “good” and a 740 to 799 credit score is “excellent.”

Even if your credit score is lower than 670, you could still be approved for an auto loan. The lender might just charge you a higher interest rate since you’d be considered a more risky borrower.

Both your FICO® score and VantageScore are based on a range of factors including:

The total amount of debt you owe
Payment history
Length of credit history
New credit you apply for (hard credit inquiries)
Type of credit accounts you currently have (account mix)

All of these factors hold some weight when the credit bureaus calculate your score, which gives lenders a good idea of if and how they should offer a loan. From a borrower’s standpoint, a lower credit score means you might not be approved for the loan terms you want, or you might pay more in total loan costs.

What Is the Minimum Score Needed to Refinance a Car?

There are hundreds of lenders that offer auto loans and auto refinancing. The list ranges from banks and credit unions to online lenders, dealerships, and more. Each lender has its own guidelines including the minimum credit score they accept.

This is why there’s no universal minimum credit score requirement to refinance an auto loan. Some lenders even focus on working with subprime borrowers who have a 600 credit score or lower. Meanwhile, a local credit union might not offer an auto loan or auto refinance to someone with a score that’s less than 660.

The good news is that there will likely be a lender who will be willing to offer you a loan no matter what your credit score is. Still, this doesn’t mean you should accept the loan – especially if the terms are not good or helpful to your situation.

According to RateGenius’ 2022 State of Auto Refinance Report, the average credit score of auto refinance borrowers the previous year was 670. However, this doesn’t mean borrowers who had a credit score below 670 weren’t approved to refinance.

Although credit scores are one concern, it’s also important to make sure that refinancing your auto loan makes sense for you financially. And even with an excellent credit score, there is no guarantee you’ll be approved to refinance your auto loan since lenders look at other factors as well.

Aside From Credit, What Else Do Lenders Look At?

Lenders look at more than just your credit score to determine if you qualify for a loan or not. Here are a few other important factors to be mindful of.

Debt-to-income (DTI) ratio (DTI)

Your DTI is a simple calculation that determines how much of your income is going toward current debt payments. DTI is expressed as a percentage and the formula is your total minimum monthly debt payments divided by your gross monthly income (before taxes).

Total debt includes all minimum payments for current loans and credit accounts such as student loans, personal loans, auto loans, mortgages, credit cards and so on. So, if you add up all your minimum debt payments and they total $1,000 for the month and your income is $5,000, your DTI calculation would be:

$1,000 / $5,000 = 0.20 = 20%

The lower your debt-to-income ratio, the better because it tells lenders you can afford to pay for your auto loan along with other current debt. Most lenders prefer to see a DTI below 36% but some mortgage lenders will allow up to 43% to 45%.

Loan-to-value (LTV) ratio

Your LTV ratio is used to evaluate the value of your vehicle. This is done during the application process by comparing the amount of your existing auto loan balance to the value of the vehicle. Since cars depreciate over time, the value of your vehicle will change and likely decrease as the years go by.

Since auto loans are secured, meaning a lender can repossess the vehicle due to nonpayment, your LTV ratio lets lenders know if they can cover the loss should they have to sell your vehicle to pay back the loan.

This means, lenders prefer cars that are newer and have a higher value than the loan amount. There is no set LTV since different lenders have their own guidelines.

Income

Your income is part of your DTI, but in addition to credit, lenders will evaluate your income to make sure you can financially afford to pay back your auto loan.

When you apply to refinance your auto loan, you’ll need to provide proof of employment, including check stubs or even a tax return if you’re self-employed. You can submit proof for all forms of monthly income you receive including salary and tips, social security, or rental income.

Ideally, you’ll want a higher income with less debt to maintain a low debt-to-income ratio.

Your current vehicle’s details

When you apply for an auto loan or auto loan refinance, you’ll need to provide certain details about your vehicle including the year and model, along with the mileage and current auto loan balance.

Lenders set their own maximum age and mileage requirements for auto loans, and this information will also help determine your LTV.

If your vehicle is older or has a lot of miles, a lender could deny you an auto loan refinance. However, you might notice the recurring theme that not all lenders are the same and another one might approve you with the same vehicle age and mileage. So don’t let the fact that you don’t have a new car keep you from applying for a refinance.

As you can see, a good credit score does not guarantee approval for an auto loan just as a lower credit score doesn’t guarantee a denied application. Weaknesses in any area discussed above can impact your approval and the auto loan rates you’ll get.

How to Increase Your Chances of Getting Approved to Refinance an Auto Loan

If you’re nervous about getting approved for an auto refinance loan, don’t worry. There are plenty of things you can do to strengthen your financial profile and reduce the risk to a lender. Remember that you don’t need a perfect financial situation to get approved, but making some of these improvements can help.

Improve your credit score

A higher credit score could help you save money on your auto loan if you can lock in a lower interest rate. To increase your credit score, start by reviewing your credit report to pinpoint areas for improvement. Make sure you’re paying bills on time and limit your hard inquiries. If you have credit cards with low or no balance, keep them open to extend your credit history length.

You can also use tools like Experian Boost to increase your score since it includes reporting for your phone and utility bills. Applying with a cosigner who has good credit can also give you a boost and improve your chances of getting approved.

Lower outstanding debt

Lowering your debt before applying for an auto loan has so many benefits. It can help increase your credit score, lower your DTI, and provide more peace of mind and cash flow. Choose one debt to focus on at a time and consider starting with the one that has the highest interest rate.

Add debt payments to your budget and set up autopay. Then, put any extra money toward the account to chip away at it faster.

Make a larger down payment

Making a larger down payment will lower your loan amount and total loan costs. When applying for an auto refinance loan, you can also choose to make a down payment which can help lower your LTV ratio.

Even if you’re upside down on your car loan (meaning you owe more than the vehicle is worth), you could still get approved to refinance with a new loan. Making a down payment can only improve your chances for approval and make lenders feel that their risk is even lower.

The same goes for making extra car loan payments when possible. If you know you plan to refinance in the future, it could make sense to lower your loan amount by making extra payments.

Increase your income

Increasing your income is another way to lower your LTV ratio. See if you can pick up extra hours at work or apply for a promotion. If you have time in your schedule, apply for a part-time job or consider a temporary side hustle that can raise your income. Just remember, you’ll need to show lenders that your income is consistent and validate it with pay stubs or a bank statement.

Shop around

You probably shop around before making a purchase more than you think. Since a car is a very costly purchase, you can benefit from shopping around for a new lender to compare rates and loan offers. Use the information you find to ensure you’re getting the best loan terms for your needs.

Don’t Give Up On Auto Loan Refinancing Due to “Bad Credit”

Refinancing an auto loan with a lower credit score is possible. There are so many lenders and each one sets its own guidelines and requirements for eligibility. Ultimately, your credit score will most likely not count you out for getting a new auto loan since there are other factors lenders look at.

Can You Refinance a Car Loan With the Same Bank?

Posted on October 19, 2022November 7, 2022 by Autopay

If you’re considering refinancing your car, you’re probably asking yourself “what is the easiest and cheapest way to refinance my auto loan?” If that leads you to wonder if you should ask your current lender to refinance your loan, there are some things that you should consider first.

Can I refinance a car loan with the same bank?

Refinancing your car loan with the same bank or credit union that issued you the original loan is often a possibility since lenders don’t want to lose your business to a bank offering more competitive rates.

However, not all lenders will allow you to do so, so you may need to check your lender’s policies. It may also depend on changes to your financial profile and credit score since you were granted your original loan.

How Long Do I Have to Wait Before I Can Refinance My Auto Loan?

With auto loan refinancing, there is no official waiting period required between taking out a loan and refinancing it. You can refinance your loan as soon as you can find a lender willing to do so.

However, you might have a hard time convincing your current lender to refinance your loan if you just recently took it out. That’s unless loan rates drop quickly and they are afraid to lose your business to a different lender.

The Pros and Cons of Refinancing With the Same Bank

When done responsibly, refinancing your car loan could come with many pros, like lower monthly payments, and very few cons. You most likely won’t even lose your car’s warranty should you decide to move forward with refinancing, but make sure to confirm with your provider beforehand.

However, refinancing your auto loan with the same lender offers a unique set of pros and cons that could affect your financial situation.

Let’s examine the pros:

You might have less paperwork to fill out. Since your lender already has you on record as a borrower, you might have to provide less information in order to refinance your existing loan. This could save you paperwork and time, but that all depends on the lender and their underwriting policies.

You might be more familiar with your current lender’s policies and customer service. If you’ve been using your loan provider for some time, you’re likely familiar with their policies and customer service. If you like your current lender, refinancing your loan through them ensures that you keep the same great service.

Your loyalty might be rewarded with discounts. In an effort to keep you as a customer, a bank might offer you discounts on fees and interest rates when you refinance with them. You will need to contact your lender to ask them if they offer any refinancing discounts for existing customers.

You might be able to keep your online account. Keeping your current lender usually means that you can keep your online account and the documents stored within it. This will keep you from needing to learn a new lender’s systems and keep all of your auto lending documentation in one place; that way you have less to keep track of.

Now, let’s examine the cons:

You might miss out on lower interest rates and loan terms. Refinancing with the same bank, although convenient, isn’t always best if you’re after a better interest rate. If your loan terms are the reason you’re refinancing, it’s likely that you can find a loan company that will beat the loan terms that your current lender will offer you in their refinancing offer.

Your current lender might charge prepayment penalties. Prepayment penalties help keep lenders from losing out on profits should you close the loan early. If your lender requires them, this will need to be paid before you can proceed with another loan.

If you don’t like your current lender’s service and policies, refinancing with them will prolong your bad experience. If you don’t like your current lender’s service or policies, refinancing your car loan with them will only mean that you have to deal with them longer.

Whether the pros or cons weigh heavier with you is based on your individual situation.

Is It Cheaper to Refinance an Auto Loan Through Your Current Lender?

Even though there is a possibility that refinancing your current loan through the same lender can save you some time, it might not save you much money. In fact, it might cost even more, since some lenders charge prepayment penalties.

A prepayment penalty ensures that the lender receives at least some of the profits that they would make off the interest of the original loan, should it be cut short because it’s paid off early.

These penalties are often 2% of the outstanding loan balance. So, if you refinance your $10,000 loan and your lender charges a 2% fee, you’ll pay $200 just to pay off your loan early and replace it with a new one.

Plus, even if your lender offers you a discount on fees required to close on your new loan, the savings might not outweigh what you’ll save on interest with a better loan.

It largely depends on factors like your financial profile and credit score, and whether or not they have improved since you originally took out the loan. You don’t need a perfect credit score to refinance your loan, but if it’s not very high, you should try to improve it even slightly before you consider refinancing.

To find out how much money you could save by refinancing your auto loan, you can use our auto loan refinance calculator to estimate potential savings.

Is It Easier to Refinance an Auto Loan Through Your Current Lender?

Whether or not refinancing with your auto loan’s current lender is any easier than doing so elsewhere depends on your experience with your lender. If you have made consistent, on-time payments throughout the life of the loan and have a positive credit history, refinancing with them will likely be straightforward.

Depending on your lender’s refinancing process, this could mean that you don’t have to fill out a lengthy application, provide as many financial documents, or learn an entirely different online platform for managing your loans.

On the other hand, if your lending experience has been difficult, especially if you have missed or late loan payments, you can expect that the refinancing process might be as well.

If your lender finds you to be a higher credit risk, your refinance offer from your current lender might not be the best. Luckily, you have many other refinancing options.

Should You Refinance Your Car Loan With the Same Lender?

Whether or not you should refinance your car loan with your current auto lender depends on if there is a better refinancing deal out there for you. To make sure that you don’t miss one or have to refinance more than once, you should compare loans offered by multiple lenders to your current lender’s refinance offer.

Shopping through a marketplace like AUTOPAY lets you compare loan terms from multiple lenders, so you can feel confident knowing that you’re getting the best deal. To find the best refinance loan for you, start by filling out our auto refinance form.

How to Know if You Shouldn’t Refinance With the Same Lender

You’ll know that you shouldn’t refinance with your current lender when you find a refinance offer that beats the one that your current lender offers. Since lenders are always looking to attract new customers, it’s likely that there’s a lender out there willing to give you better terms.

If the terms of your loan aren’t your reason for refinancing your auto loan, a negative experience with your lender might be. Whether that negative experience is a bad customer service experience or unexpected fees, you shouldn’t refinance with the same lender if you haven’t been happy with your lending relationship.

How to Refinance Your Auto Loan With the Same Lender

When you refinance your auto loan through the same lender, you can expect the process to be similar to that of applying for your original loan. However, each lender will be different. You can expect the refinancing process through your current lender to look something like this:

You will fill out an application. Your lender should have all of your personal, loan, and vehicle information on file, like the current loan amount and if you have a cosigner. So, the application process for current borrowers is often simple, but it kicks off the rest of the process. This is your chance to update any financial or personal information that might affect whether you will be approved or denied for refinancing.

Your lender will review your eligibility. Once your lender has received your application, they will work to figure out if you qualify for a new loan. To do so, they will review your proof of income, credit history, current auto loan standing, vehicle value and more.

You will receive your lender’s decision. Once your lender has determined whether or not you qualify, they will issue you an approval or denial. This can come by way of email, phone call, an in-person discussion or even a text, so make sure to confirm which method your lender will use before decision day.

If you’re approved, you’ll follow your lender’s instructions to close on the loan. Depending on whether you are working with an online lender or an in-person one, your lender will either instruct you to complete the loan process online or to meet them in person. During this process, you should be prepared to sign the loan contract and provide any last-minute documents that your lender might need.

Your loan funds will be distributed. If you’re refinancing through the same lender, they’ll handle paying off the old loan and bringing your balance back to current, so you won’t need to handle distribution.

All in all, refinancing an auto loan should not take more than a couple of weeks from start to finish.

Is Refinancing With Poor Credit Worth It?

Posted on October 12, 2022November 2, 2022 by Autopay

Yes, you can refinance your car loan even if you have a lower credit score. But is it worth it? When refinancing with a lower credit score, you must consider all your options. However, there is potential to save money by refinancing your car loan.

You need to begin with understanding how credit scores work and what you can do to improve yours. A higher credit score is essential for getting the best interest rates on a loan because a higher interest rate means you’ll pay more in the long run.

You also need to ask yourself some important questions like what are your refinancing goals, can you secure a lower interest rate and are the new loan terms better than your current one?

If you’re unsure whether refinancing is worth it or want to explore it as an option, we’ll examine how a lower credit score affects your chances of getting approved for a car refinance and how you can increase your chances.

Understanding Credit

We’ll discuss credit scoring and what factors influence your score. Knowing more about credit can help you make better choices when borrowing money.

Credit scores explained

Your credit score is a number that shows your level of creditworthiness — or how likely you are to repay a loan. The higher your score, the better your chances of being approved for a loan with a lower interest rate. A FICO® score is the most widely used credit scoring model and assigns a number between 300 and 850.

Excellent: 800–850
Very Good: 740–799
Good: 670–739
Fair: 580–669
Poor: 300–579

A lender takes more than just a credit score into consideration – so even if your score falls in the lower range, it’s still possible to qualify for refinancing.

How credit scores are determined

Credit scores are calculated using many factors, each weighted differently. The following is a list of considerations that affect your credit:

Payment history (35%) – The less payments missed, the better.
Utilization rate (30%) – How much of your total available credit is free.
Length of credit history (15%) – 12 months or more is best.
New credit (10%) – Recently acquired loans, credit lines and credit cards.
Credit mix (10%) – Showing you can manage different kinds of credit well.

It’s always a good idea to check your credit each year to make sure all of these factors are reported correctly.

How to check a credit score

If you’re considering auto loan refinancing and you think you have a low credit score, the first thing to do is check your credit score. You can check your credit score online for free or use this form to check it by mail for free. You can do this free credit check once every year.

Checking your credit score tells you where you stand. You might also be fortunate enough to find that your score is not as low as you thought. If that’s the case, you might have a better chance of being approved for a loan with a lower interest rate. On the other hand, if it’s lower than you thought, don’t worry — there are still things you can do to improve your chances of being approved.

The important thing is having the information, as it will allow you to make informed decisions.

The reasons for a poor credit score

There are several reasons why your credit score might be low, including:

Late or missed payments – When you miss payments on your bills, it can negatively impact your credit score. In addition, repeatedly missing payments can result in your account being sent to collections, damaging your score even further.
Collection accounts – If you have any unpaid debt that has been sent to collections, this will be added to your credit report and lower your score.
High balances – Carrying a high balance on your credit cards can also lower your score.
Length of credit history – If you haven’t been using credit for very long, you might not have much credit history to show.
New accounts – Opening too many new accounts at once can lower your score.
Bankruptcy filing – A bankruptcy filing will stay on your credit report for seven years and will significantly impact your credit score as lenders will see you as a high-risk borrower.

According to Forbes, there are also reasons why responsible people might have low credit scores. One way is having a single credit card that drives up utilization, which is the amount of credit you’re using compared to the amount of credit you have available.

For example, if you have a $5,000 credit limit and use $3,000 of that, your utilization ratio is 60 %. According to Experian, the average utilization rate is 17.0 % among consumers with FICO® credit scores of 780, which is in the “very good” zone for credit ratings.

An excellent way to control this ratio is to keep your balances low. You can also grow your available credit if you open a new line of credit or get a credit limit increase.

Knowing why your credit score is low can help you make a plan to improve it.

Improving your credit score

There are many things you can do to improve your credit score. Try these tips:

Make all your payments on time – This is the most important factor in determining your credit score, so it’s crucial to make all your payments on time, every time.
Keep your balances low – Keeping your balances low will help improve your credit utilization ratio, which is important for determining your credit score.
Avoid opening too many new accounts at once – Opening too many new accounts at once can cause you to appear riskier to lenders and lower your credit score.
Check your credit report regularly – Checking your credit report regularly can help you catch any errors or inaccuracies that might negatively impact your score.
Consolidate your debt – Consolidating your debt with a bank or credit union could help you pay off debt faster.

Once you’ve done everything in your power to improve your credit score, it’s time to consider what your goals are with refinancing and some other important factors.

Before Refinancing Your Car Loan

Think about your goals, the terms of your current loan and other important factors with refinancing your car loan.

Goals for refinancing

It’s important to know what your goals are. Ask yourself questions like:

Am I looking to lower my monthly payment? – This can help to alleviate some financial stress, but keep in mind that it could extend the length of your loan. You might also pay more in interest over the life of the loan.
Am I looking to save on interest and pay off the loan faster? – A shorter-term loan can help pay off your loan sooner and save on interest, but it might mean that your monthly payments are higher. This is advisable if you can afford the higher payments.
Am I looking to get cash out? – You might be able to get cash back when you refinance your car loan, but keep in mind that this will likely increase the interest you pay over the life of the loan.

Knowing these goals will help you determine what type of loan is best for you. In addition, it will give you direction when working with a lender.

Terms of your current loan

You’ll need to know the terms of your current loan before you can refinance. This includes things like:

Balance of your loan
Interest rate
Length of the loan
Monthly payment

You’ll also need to know the value of your car so you can determine how much equity you have. You can use a car valuation tool to get an estimate.

Be aware of fees

There are a few fees to be aware of when refinancing your car loan. These can come from the new lender or the old one. The new lender might charge application, processing and origination fees. The old lender might charge an early termination fee or other fees. You might be able to negotiate these away in some cases, but they’re still something to be aware of.

Understand what you can afford

Knowing what you can afford before starting the refinancing process is important. Remember that just because you’re approved for a loan doesn’t mean you have to take it. Only borrow what you need and what you can afford to pay back.

Calculate your monthly car payment by considering the loan amount, interest rate and length of the loan. Or use a refinance car loan calculator to get a quick idea. Then, use a budgeting tool to see if you can comfortably afford the new payment.

Strategies to Get Approved for a Refinance Loan

If you’re looking to refinance your car loan with a low credit score, you can do a few things to improve your chances of approval. Here are a few strategies.

Improve your credit score

We’ve already discussed how you can start to improve your credit. However, improving your credit score will take time and depends on why it’s not so great.

So, if your lower credit rating is due to a lack of credit history, you might be able to fix that by using a credit builder loan or becoming an authorized user on another person’s credit card. If your credit score is low because of high utilization, you can try to pay down your debt or get a debt consolidation loan.

On the other hand, if you have a history of non-payment, it will take some time and effort to improve your credit score. So the most important thing is to make all your payments on time going forward.

Shop around

Shopping around is essential when looking to refinance your auto loan with a low credit score. Not all lenders have the same standards, and some might be more willing to work with you than others. Therefore, it’s a good idea to compare offers from a few different banks, credit unions and other lenders before you make a decision.

When you’re comparing offers, be sure to look at more than just the interest rate or monthly payment. Other factors like fees and loan terms can affect the overall cost of the loan. For example, a low-interest rate with a long loan term might cost you more in the long run than a higher interest rate with a shorter term.

Of course, if your goal is to save on interest, this won’t work. However, it might be a good option if you’re hoping to decrease monthly payments to relieve financial pressure.

Get a cosigner

If you’re having trouble getting approved for a loan on your own, you might be able to get approved with a cosigner. A cosigner is somebody who agrees to sign the loan with you and is responsible for making payments if you can’t.

This will help improve your chances of being approved because it shows that you have someone else who is willing to take on the risk. Your prospective cosigner should have a good to excellent credit score and show enough monthly income to make the payments if necessary.

Is Refinancing Worth It?

Refinancing your car loan with poor credit can be a good way to save money on interest, lower your monthly payments or both. However, it’s not always the best option, and there are a few times when you shouldn’t refinance.

Refinancing is probably not a good idea if you’re upside down on your loan, meaning you owe more than the car is worth. This is because you could still owe the same amount of money (or even more) after refinancing.

You should also avoid refinancing if you’re close to the end of your loan term. This is because you’ll likely have to pay fees and closing costs, negating savings from a lower interest rate. If you’re only a short time away from paying off your car loan, you’ve also already paid most of the interest.

This is because most auto loans front-load interest, meaning most of the interest is paid at the beginning of the loan. If you’re nearing the end, you’re working on the principal.

Refinancing When It’s the Best Option for You

Refinancing your car loan with a low credit score can be a good way to save money on interest, lower your monthly payments or both. However, it’s not always the best option, and there are several factors to consider before refinancing.

For example, if you’re upside down on your loan or close to the end of your term, refinancing might not be worth it. In addition, it’s important to shop around for the best deal. Lastly, always keep your financial goals in mind and ensure that refinancing is the best option for you.

Trade in vs. Refinancing: What Makes Sense for You

Posted on September 21, 2022October 11, 2022 by Autopay

Making the decision to trade in your car or refinance your auto loan is a big one. However, there are several things you’ll want to consider before making a decision. In this article, we’ll explore some key factors you should examine when choosing.

How Trade-Ins Work

When you trade in your car, you’re essentially selling it back to the dealership (or whoever you’re trading it in to). They will then give you a certain amount of money to purchase your new car. A major advantage of this is that it can save you time and hassle in trying to sell your car on your own.

Another benefit is that you might be able to save on taxes. For example, when using your trade-in toward the purchase of a new vehicle, your state might tax you on the full value of the new car or the difference of the new car value minus the trade-in value.

If it’s the latter, you’ll be able to lower your taxes and overall price tag. And according to Consumer Reports, the majority of states do tax the difference.

And finally, if you still owe money on your trade-in, the dealership might be able to roll that amount into your new loan. Just keep in mind that you’ll be paying interest on that amount over the life of your new loan.

When you trade in your car, keep the following in mind. Private sales usually result in more money than trading it in to a dealership. Dealerships need to make a profit off your vehicle, so they typically give less money than the car is worth.

You’ll also be subject to the laws of supply and demand. If the dealership is flooded with trade-ins of the same make and model as your car, they might not give you as much money as it’s actually worth. However, this could work in your favor in some cases if the dealership is desperate for your type of car.

woman signing for a new car at a dealership

Refinancing Your Auto Loan

When you refinance your car loan, you’re essentially taking out a new loan with a new interest rate. A great benefit of this is lowering your monthly payments, saving you money in the long run.

And with 47 percent of Americans extending their car ownership beyond their original forecast, according to Deloitte, you might find yourself in this position. However, remember the following when considering auto loan refinancing.

If you have good credit, you might be able to qualify for a lower interest rate than what you’re currently paying. This means you could save money on your monthly payments. However, if you have bad credit, you might not be able to qualify for a better interest rate, so refinancing might not be your best option.

Although, in some cases, you could still get better loan terms or lower your payment. You can use a refinance car loan calculator to help you figure out if refinancing makes sense for you.

Also, when you refinance your loan, you’ll likely have to pay some fees to do so. These fees can include an application fee, an origination fee and a prepayment penalty. Make sure you understand all the fees associated with refinancing before you make a decision, and shop around to find the best deal.

Lastly, you’ll want to consider the length of your loan when deciding whether or not to refinance. If you have a longer loan term, you might not save as much money in the long run by refinancing. On the other hand, if you have a shorter loan term, you could save quite a bit of money by refinancing.

Which Option Is Best?

There’s no right or wrong answer when it comes to trading in your car or refinancing your auto loan. It really depends on your individual situation and what makes sense for you. Here are some scenarios to consider.

You might want to refinance your car loan if you:

Are happy with your car and would like to keep it but want to lower your monthly payments
Have good credit and can qualify for a lower-interest rate
Don’t mind paying fees to refinance

You might want to trade in your car if you:

Are looking to get rid of your current car and upgrade to a new one
Would like to save time and hassle by not having to sell your car privately
Are okay with getting less money for your car than it’s worth

If you’re still unsure which option is best for you, we recommend reaching out to see what we can do to help you decide.

Can You Refinance a Car More Than Once?

Posted on September 9, 2022October 11, 2022 by Autopay

Yes, you can refinance your car loan more than once. In fact, as long as you can find a lender to approve you for a loan, you can refinance as many times as you want. There are no laws or regulations against it. However, there are a few things to keep in mind before you decide to refinance your car loan again.

Why Refinancing Your Car Loan Could Save You Money

When you refinance your car loan, you are taking out a new loan, ideally with a lower interest rate and possibly with a different term. This could lower your monthly payment and save you money in interest over the life of the loan. It doesn’t change the initial purchase price of the vehicle, but when you do this multiple times, it’s possible to save even more money.

Ensure It’s the Right Time to Refinance a Loan

Refinancing should make sense, so you want to be sure that it’s the right move for you before you sign on the dotted line. Here are a few things to consider:

Check your credit score – Your credit score is one of the most important factors that lenders take into account during the loan approval process. If your credit score has improved since you originally financed your car, you might be able to qualify for a better interest rate. However, if your credit score has dropped, you should hold off on refinancing until it improves.
Wait for interest rates to drop – Interest rates are constantly fluctuating, so it’s important to keep an eye on them. If rates have changed and gone down since you originally financed your car, it might be worth refinancing to get a lower rate and save money.

man on the phone while looking at his interest rate on the computer

Your car loan amortization schedule – If you have a simple interest loan and have limited time left on it, it might not make sense to refinance since you’ll have already paid off the majority of interest and be working on paying down the principal. However, if you’re locked into a high interest rate and still have a considerable amount of time left on your loan, it might be worth refinancing to save money in the long run.
Your financial situation – When you refinance, you can also change the length of your loan, which can lower your monthly payments. If you’re in a position where you need the financial relief of lower monthly payments, refinancing might be a good option for you. Conversely, if you have a higher income and are looking to clear up debt, you might want to consider a shorter loan term so you can pay off your car loan faster.

After you’ve considered all of the above, you’ll know if it’s the right time for you to refinance.

Consider the Fees

Each time you refinance, you’re taking out a new loan. That means you’ll have to pay any associated fees again. These costs can add up over time, so it’s important to factor them into your decision to refinance. Be sure to ask about any potential fees and compare them to other offers before you choose a new lender.

Additionally, some lenders might charge a prepayment penalty for refinancing. This fee is typically a percentage of your loan amount and is charged if you pay off your loan early.

Finding a New Lender When You Refinance

When you’re ready to refinance your car loan, the first step is to shop around for a new lender. This could be a bank, credit union or online lender.

There are a few things to keep in mind when you’re looking for a new lender:

Interest Rates – Be sure to compare interest rates from multiple lenders before you choose one.
Fees – As mentioned above, fees can add up over time, so be sure to ask about them upfront.
Reputation – Check out online reviews and Better Business Bureau ratings to get an idea of a lender’s reputation.
Customer Service – Find out what the customer service is like before you commit to a lender. This can be especially important if you have questions or need assistance down the road.

Once you’ve checked into these factors, you’ll have the information you need to decide which lender is best for you.

Refinance to Save

You can refinance your car loan more than once, but be sure to do your homework first to make sure it makes financial sense for you. Start by using a refinance car loan calculator and then compare rates and fees from multiple lenders to find the best deal. Remember to factor in any associated costs so you can make an informed decision that’s right for your financial situation.

How Soon Can You Refinance a Car?

Posted on August 24, 2022September 13, 2022 by Autopay

If you’ve considered refinancing your car, know that it might be possible to refinance as soon as a few months after your original purchase, though your terms could be better if you wait six months to a year. Don’t wait too long, though. If you are too far into your repayment term, lenders might be unwilling to approve your application.

Refinancing a Car Loan

Refinancing a car loan involves getting approved for a new loan that will:

Pay off your current auto loan.
Allow you to pay off your vehicle under more favorable terms.

Refinancing will require you to apply for a refinance loan, a process similar to auto loan financing for a new car.

Refinancing in the First Months of Your Loan

If you recently purchased a car and aren’t happy with your current loan terms, refinancing might be a possibility. Still, there are several factors that could hamper your ability to win approval for a refinance or to get the terms you are looking for:

In cases where you have very recently purchased your car (such as in the past month), your car title or registration might not yet be processed. A lender will either need the title (if you are in one of the states that allows car owners to hold their titles before loan payoff) or registration to begin the refinancing process. Because of this, there might be a delay in being able to refinance.
Taking out a car loan often lowers your credit score. This is due to two factors. First, the hard pull on your credit report results in a credit inquiry being reported to the credit bureaus. This can take a few points off your score. Your loan also contributes to your debt load, which, depending on how much debt you have, can also lower your score.
Some lenders have a policy against refinancing a new loan. They’ll want to see at least six months of payments before considering your refi application.

Still, everyone’s situation is unique and you could be able to get approved for refinancing in the earliest months of your loan.

When Is the Right Time to Refinance a Car Loan?

Loans that are six to 18 months old are often in the “sweet spot” for refinancing. There are two primary reasons for this:

No administrative or credit issues: By this time, your paperwork has been sorted out and your credit score has likely rebounded.
Loan balance is still high: A higher loan balance makes the refinance profitable for the lender.
It’s less likely that you are upside down on your car loan at this point. Being upside down on your car loan means that you owe more to your lender than your car is worth. Many lenders won’t consider refinancing in this situation.

There are other factors to consider, however. If interest rates are currently high, refinancing is likely not a good idea. Pay attention to economic indicators before seeking a refi loan.

Another thing to consider is your use of credit and financial situation. If you have recently financed a large purchase, you might find it hard to get attractive terms on a refinance. Use our refinance car loan calculator to determine how much you’ll pay each month and over time.

Don’t Wait Too Long to Refinance Your Car Loan

Unfortunately, it’s also possible to wait too long to refinance your auto loan. Here are some scenarios in which this could be the case:

Your car has a lot of miles on it: Cars with a lot of mileage are worth less, which can make refinancing more of a challenge.
You are close to paying off your loan: Lenders want there to be at least a few thousand dollars left on your loan balance before agreeing to issue a refinance loan.
You are already in financial trouble: Refinancing a car loan can be a decent strategy if you need to lower your monthly payments, you still have good credit and a verifiable income. If your credit has already been damaged or you’ve lost your job, you might still qualify for refinancing, but the process might take a bit longer.

It pays to be a savvy consumer, particularly when it comes to large purchases. If you believe that you might be able to get a better deal on your auto loan through refinancing, take the time to do some research and then make sure to shop around to find the best loan for you.

If I Refinance My Car, Will I Lose My Warranty?

Posted on August 22, 2022October 11, 2022 by Autopay

Refinancing a car loan can be confusing, particularly if you haven’t done it before. One question you might have is whether your car warranty (or warranties) will continue under your new loan.

If so, breathe easy — most manufacturer warranties do remain in effect. Don’t let that keep you from trying to refinance and get a better auto loan rate.

But what about non-manufacturer car add-ons like extended warranties and vehicle service contracts? Those are different. We’ll cover why that is below.

Warranty Assurance Guarantee Secured Plan

What Is a Car Warranty?

A car warranty is an agreement from your car’s manufacturer to repair mechanical defects for a period of time or mileage after you purchase your vehicle.

A bumper-to-bumper or “comprehensive” warranty is always provided by the manufacturer when you buy a new car. For example, your new car’s warranty may provide coverage for three years or 36,000 miles, whichever comes first.

Used cars may or may not include a warranty. Sometimes the manufacturer’s warranty is still in effect. There are also a handful of states with lemon laws for used cars which require varying types of coverage, much like a warranty. However, most states do not offer any sort of protection from defects or failures, even if the seller lied about its condition.

Vehicle Service Contracts and Other Car Loan Add-ons

When you purchased your car, you might have purchased other extras to cover additional repairs over an extended length of time. The cost of these extras (like GAP waivers or vehicle service contracts) is often rolled into your original car loan or your refinance loan, but you can also buy these products later.

A vehicle service contract covers specific mechanical failures and repairs for a specified timeframe or up until the mileage limit is reached. A VSC is not an extended warranty. Instead, it functions more like insurance – you file a claim and pay a deductible to cover the remaining costs – and is offered by an independent provider, not the car manufacturer.

The price of a vehicle service contract can range anywhere from a few hundred dollars to more than a thousand dollars, depending on your vehicle, coverage selection and where you buy it.

Maintaining Your Car Warranty During Refinancing

If you’ve decided that it’s time to refinance your car loan but are concerned about maintaining your warranty or add-ons during the process, don’t be. A new car warranty stays with the vehicle, regardless of the status of your car loan.

The issuer of your extras and add-ons may or may not honor your contract even after the contract has been paid off by the refinance loan. In most cases:

Refinancing your car loan will not cancel your vehicle service contract. However, it’s important to review your original agreement with each provider to make sure that your terms aren’t affected by refinancing your loan.

Refinancing your car loan will cancel your GAP protection plan. The original loan has been paid off, so there is no longer a financial “gap” to protect. You will need to purchase a new GAP waiver for the refinance loan.

Don’t Let Warranty Concerns Keep You From Refinancing

To recap, refinancing your car loan shouldn’t make you lose your warranty or vehicle service contract, but you should check the fine print of your plan’s details to confirm. So go ahead and find yourself a better auto loan. Your wallet will thank you later.

Why Would You Refinance a Car?

Why Refinance a Car Again?

Top Questions About Refinancing Multiple Times

How soon can you refinance a car?

Does refinancing a car mean starting over?

Can I refinance if I have a low credit score?

Is it wise to refinance multiple times?

Does refinancing a car hurt your credit?

Does refinancing give you more money?

Can you refinance a car loan with the same bank?

When should you not refinance a car loan?

How do I know if refinancing is right for me?

The Bottom Line on Refinancing More Than Once

What Is Auto Refinancing?

Understanding Your Savings

Factors That Influence Savings

Shop Around to Find the Best Auto Loan

1. Check Your Credit Reports

2. Don’t Close Accounts

3. Don’t Make Any Large Purchases

4. Don’t Apply for Credit

Take Steps to Improve Your Credit Today

How Credit Scores Affect a Car Loan

What Is the Minimum Score Needed to Refinance a Car?

Aside From Credit, What Else Do Lenders Look At?

Debt-to-income (DTI) ratio (DTI)

Loan-to-value (LTV) ratio

Income

Your current vehicle’s details

How to Increase Your Chances of Getting Approved to Refinance an Auto Loan

Improve your credit score

Lower outstanding debt

Make a larger down payment

Increase your income

Shop around

Don’t Give Up On Auto Loan Refinancing Due to “Bad Credit”

Can I refinance a car loan with the same bank?

How Long Do I Have to Wait Before I Can Refinance My Auto Loan?

The Pros and Cons of Refinancing With the Same Bank

Is It Cheaper to Refinance an Auto Loan Through Your Current Lender?

Is It Easier to Refinance an Auto Loan Through Your Current Lender?

Should You Refinance Your Car Loan With the Same Lender?

How to Know if You Shouldn’t Refinance With the Same Lender

How to Refinance Your Auto Loan With the Same Lender

Understanding Credit

Credit scores explained

How credit scores are determined

How to check a credit score

The reasons for a poor credit score

Improving your credit score

Before Refinancing Your Car Loan

Goals for refinancing

Terms of your current loan

Be aware of fees

Understand what you can afford

Strategies to Get Approved for a Refinance Loan

Improve your credit score

Shop around

Get a cosigner

Is Refinancing Worth It?

Refinancing When It’s the Best Option for You

How Trade-Ins Work

Refinancing Your Auto Loan

Which Option Is Best?

Why Refinancing Your Car Loan Could Save You Money

Ensure It’s the Right Time to Refinance a Loan

Consider the Fees

Finding a New Lender When You Refinance

Refinance to Save

Refinancing a Car Loan

Refinancing in the First Months of Your Loan

When Is the Right Time to Refinance a Car Loan?

Don’t Wait Too Long to Refinance Your Car Loan

What Is a Car Warranty?

Vehicle Service Contracts and Other Car Loan Add-ons

Maintaining Your Car Warranty During Refinancing

Don’t Let Warranty Concerns Keep You From Refinancing

Resources

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