Refinance your auto loan
Refinancing could lower your auto loan rate and monthly payment while saving you hundreds of dollars.
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Refinancing your car loan is fast and easy — and can put more money in your pocket. You may be able to reduce your monthly payment and boost your total savings on interest over the life of the loan.
You generally need a history of six to 12 months of on-time payments to make refinancing worthwhile and possible. The new rate you’ll qualify for depends on multiple factors, including your credit history and score.
Learn more below from our auto loan refinance FAQ.
NerdWallet refinance partners
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- Direct-to-consumer online auto lender
Frequently Asked Questions
Refinancing your auto loan replaces your current loan with a new loan, from another lender, hopefully with a lower interest rate. You can keep the length of loan the same as the number of months left on your current loan, or you can shorten or extend it.
Generally the new loan amount will be the balance left on your current loan. However, some lenders do allow you to take cash out when you refinance. Since there often isn’t much equity in a car loan, taking cash out could increase your risk of becoming upside-down on your loan — owing more than you car is worth. So, it’s really best not to take cash out unless you made a large down payment and suddenly need money for an emergency.
Learn more about how to refinance your auto loan.
Here are a number of situations when it makes sense to refinance your auto loan.
If your credit has improved. When you bought your car, maybe your credit history wasn’t great. But now, if you’ve been making consistent, on-time payments, your credit has probably improved and you may qualify for a lower interest rate. This will reduce your monthly payment and save you money in interest over the life of the loan.
A dealer marked up your interest rate. When you got your existing loan, the car dealer might have charged you a higher interest rate than you could have qualified for elsewhere. This often happens to shoppers who didn’t check their credit score or what rate they might qualify for before buying a car. There’s a good chance you can undo the damage by refinancing and getting a new loan with a lower interest rate.
If you can’t keep up with payments. You may have bought too much car, or overestimated your ability to pay off your current auto loan. Or maybe you’re suddenly facing unexpected financial challenges. By refinancing, you can extend the length of the loan, which will lower your payments. But don’t take this step lightly. If you extend the term of the loan, you’ll pay more in interest. However, it’s better than damaging your credit by missing payments or facing repossession.
When interest rates drop. Interest rates fall for a variety of reasons: a changing economic climate, increased competition in the marketplace and regulatory changes. If rates are lower now than when you first got a car loan, refinancing could help you pay off your loan sooner or save you money on interest.
Learn more about whether auto loan refinancing is right for you.
Your credit history will have a direct impact on the interest rate you’re offered. If you’ve made six to 12 months of steady, on-time payments on your current loan, it’s likely that your credit score has improved. With a better credit score, you will probably qualify for a lower interest rate when you refinance.
If your credit has gotten worse or you haven’t been able to make on-time payments, it’s time to review your finances. Make your auto loan payment a priority and set a six-month goal to improve your credit. Then apply for refinancing again. This requires discipline, but the savings are well worth it.
It can be difficult to refinance your auto loan if you have bad credit, but it might still be possible. If you’ve made six to 12 months of consistent, on-time car payments – even if your score hasn’t yet improved – a lender might work with you. Apply to multiple lenders, because each one has different credit score requirements. The lowest minimum credit score requirement among the lenders listed here is 500, but most require higher scores. Your bank or credit union might also be more open to working with you because you already have a relationship with them.
If you can afford your payments but don’t qualify to refinance, make your auto loan payment a priority and set a six-month goal to improve your credit. Then apply for refinancing again. Making on-time payments is essential to qualifying for a refinance in the future.
If you’re having trouble making payments, contact your current lender right away. A representative might be able to help you. For instance, lengthening the term of the loan increases the interest you’ll pay, but it can lower your monthly payments and help prevent a hit to your credit from missing them.
When you use the tool above, NerdWallet calculates the new estimated monthly payment and total savings over the life of the loan. Remember, these are estimates, not guarantees.
We use the information you provide about your current loan (balance, interest rate and months left) to determine your current monthly payment. Then we use your credit score, loan balance, desired new loan length and the estimated interest rates from our lender partners, based on credit tiers, to calculate an estimated monthly payment for the new loan.
To determine estimated savings, we first calculate the total lifetime cost of each loan. We multiply the monthly payment by the total number of months on the loan. The difference between the total cost of your current loan and the new loan represents your estimated lifetime savings when you refinance with the new loan.
Remember, the rates from lenders are estimates as well. Each lender has its own underwriting criteria, and the rate you qualify for will depend on your credit history, income, vehicle and other factors. NerdWallet recommends comparing offers from multiple lenders to make sure you get the best rate.
There are many lenders to choose from and each will cater to a different type of borrower. The higher your credit, the more choices you’ll have. You can check out the lender information above. You can also check rates with local banks or credit unions.
Apply to multiple lenders to see what new interest rate you can qualify for. Comparing several offers gives you the best chance of finding the lowest rate. You can use NerdWallet’s auto loan refinance calculator to see how different rates and terms will affect your monthly payment.
Keep in mind that rate shopping can also lead to being contacted by multiple lenders, especially if you use a service that compares offers for you. If you’re worried about getting overwhelmed by calls and emails, create a new email account and get a free Google Voice phone number that you can check separately.
Most auto loans carry no prepayment penalty, and refinancing has no startup fees. So, basically, the only investment is your time.
Remember that selecting the automatic payment option during the application process will give you the lowest interest rate.
Extending the length of your loan when you refinance will lower your monthly payments. However, you likely won’t save money because you’ll pay more in interest over the life of your loan.
Extending your term could also put you at risk of becoming upside-down on your loan, meaning you owe more than your car is worth. This is a risky situation to be in. If you get in an accident, and your car is totalled, your insurance might not cover what you owe. Also, if you have to sell your car, you’d still owe money on the loan.
See how much your car is currently worth with pricing guides like NADAguides and Kelley Blue Book.
Assuming you have good credit, you may be able to refinance as a way to stop being upside-down on your car loan. However, this will depend on what your car is worth and how much you borrow. This is called the “loan-to-value” ratio. Since the car is the collateral, it has to be worth enough to secure the loan for the lender.
Pricing guides like NADAguides and Kelley Blue Book can help you estimate your car’s current market value.
Once you apply, and get preapproval, call the lender to see if they can help you design a loan to solve your problem. In some cases, you might need to make a cash payment to get the loan-to-value ratio in your favor. Or, if you can afford a higher monthly payment, consider shortening the term on your new loan.
Learn more about what to do if you’re upside-down on your loan.
More on auto loan refinance
General Rate Information
Annual Percentage Rates (APR), savings and monthly payments are estimated based on analysis of information provided by you, data provided by lenders, and publicly available information. All loan information is presented without warranty, and the estimated APR and other terms are not binding in any way. Lenders provide loans with a range of APRs depending on borrowers’ credit and other factors. Keep in mind that only borrowers with excellent credit will qualify for the lowest rate available. Your actual APR will depend on factors like credit score, requested loan amount, loan term, and credit history. All loans are subject to credit review and approval.