Can You Refinance a Car Loan More Than Once?
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You can refinance your car as often as you can find a lender willing to approve a new loan, but finding a lender to refinance again and again could be difficult.
When you refinance, you’re replacing your current car loan with a new one — almost always with a different lender. Since most lenders won’t refinance their own loans, you'd likely need to get approval from a new lender each time.
Also, the most common reasons for refinancing a car loan are to save money, lower the monthly payment or pay off the loan sooner. Once you’ve refinanced to meet one or more of these goals, it may not be easy finding another loan that provides any additional benefit.
Reasons to refinance a car loan more than once
Throughout the life of your auto loan, you may experience different situations when refinancing makes sense — leading you to refinance more than once. Here are some examples:
To replace a dealer’s high interest rate. Maybe you financed your car at a dealership and realized the next day that you could qualify for a lower rate. If you have solid credit, you likely can find a lender to refinance your loan to a lower rate right away, or as soon as they can obtain the vehicle’s title.
To take advantage of your improved credit. If your car loan has a high interest rate because of previous credit problems or no credit history, and you’ve made on-time loan payments for six to 12 months, you might now be able to qualify for an auto refinance loan with a lower rate.
Because you need a lower monthly car payment. If your financial situation has worsened — for example, you changed jobs and took a cut in pay — you might need to refinance to a longer loan term for a lower payment that you can afford.
Why refinancing a car over and over can be a bad idea
Before you refinance your car multiple times, be aware of some potential disadvantages.
Paying more than you save. Refinancing is applying for a new loan, which can come with loan origination fees, lender processing fees and title transfer fees. Occasionally, you could have prepayment penalties for your current loan. And if you extend the loan term, you’ll likely increase the amount of interest you pay overall. So before you refinance, consider whether the benefits outweigh your total cost.
Lowering your credit score. Each time you get approved for a new auto refinance loan, the lender runs a hard inquiry on your credit report, which causes a slight, temporary drop in your credit score. In most cases, your score rebounds in a few months, but it’s still something to consider if you plan to apply for any other types of loans during that time.
Owing more than your car is worth. If you keep refinancing your car to a longer term, you can become upside down on your car loan. While you’re taking extra time to pay off your car, it’s most likely depreciating in value, and at some point, you may owe more than you could get for the car if you decide to sell it or if it's totaled in an accident.
Also, most lenders have vehicle age and mileage limits for refinancing, so if you keep extending the loan on an older car, it could become ineligible for refinancing.
Finding a lender to refinance again
Many lenders are hesitant to refinance a car that has already been refinanced many times. They perceive repeated refinancing as a sign that a borrower may be struggling to repay the loan or having other financial issues — especially if they've used cash-back auto refinancing more than once. Even if a lender approves another loan for refinancing, the loan may be considered high risk and come with a much higher interest rate.
If you think you will benefit from refinancing your already-refinanced car, take some time to weigh the advantages against the disadvantages. Shop and compare auto loan refinancing lenders to get the best rate possible. Then, crunch the numbers using an auto loan refinancing calculator to ensure you are coming out ahead.