How It Works

Refinancing an auto loan is essentially getting a new loan with new terms. A lower interest rate or longer term can potentially lower your monthly payment, though you may pay more overall. To better understand the relationship between your loan term, interest rate, and total cost, you can learn more about how amortization works.

What information do I need to use this calculator?

To use this calculator, you’ll need details about your current auto loan (remaining balance, current interest rate, and monthly payment) and your desired new loan terms (the new interest rate you hope to get and the new loan term in months or years).

How long does the auto refinance process take?

This process depends on how quickly you submit required documents, your new lender’s processing times, title transfer requirements, your approval odds, and your own funding. It can generally take anywhere from a few days to a week.

Does refinancing start my loan term over?

Yes, refinancing your auto loan replaces your current loan with your new one which is essentially the same thing as “starting over” with new loan terms. Ultimately, however, you get to choose the specifics of the loan including the length of the new loan term.

Increasing the payoff term of the loan may not be the best option for you. Remember that choosing a longer loan term may lower your monthly payment but is likely to increase the amount of total interest you pay over time. Decide whether you want a faster payoff period or a lower monthly payment when deciding between a shorter loan term, a longer loan term, or a similar term to your existing loan.

When is the best time to refinance an auto loan?

There is no “best” time to refinance. It truly depends on your financial situation and goals potentially paired with other economic factors like interest rate changes. If you’re considering refinance, here are some general “best” times to consider. If any of the following fits your plans for the future, refinancing might be right for you:

• Interest rates have dropped since you got your original loan.
• Your FICO® Score has improved significantly, allowing you to qualify for a better rate.
• You need a lower monthly payment to free up cash flow.
• You want to shorten your loan term to pay off the car faster and save on total interest.
• You initially took a higher-rate loan from a dealership and believe you can get a better offer.

What factors affect auto refinance rates?

The most common reason for fluctuating interest rates are general economic conditions and Federal Reserve’s rates influencing loan rates. But market interest rates aren’t the only thing that impacts the rate for a car loan. Other personal and individual financial factors affect that more closely. Like:

• FICO® Score and credit history: A higher score generally leads to lower rates.
• Debt-to-income (DTI) ratio: Lenders assess your ability to manage new debt.
• The new loan term: Shorter terms often have lower interest rates.
• The vehicle's age and mileage: Newer, lower-mileage vehicles typically qualify for better rates.

Are there any fees associated with auto loan refinancing?

While many auto refinance loans come with no application or prepayment fees, some lenders might charge. Common fees to watch for include:

• Origination fees: A fee charged by the lender for processing the loan.
• Title transfer fees: Required by your state to update the lienholder on your vehicle's title.
• Registration fees: Some states require re-registration with a new lender. It's always important to review the loan agreement carefully for any potential fees.

How does refinancing impact my FICO® Score?

Yes, refinancing an auto loan, like any other loan, can have a temporary impact on your FICO® Score. Since you’re applying for an entirely different loan, it’s often required for the lender to pull credit again, resulting in a hard inquiry.

Hard inquiries can cause a small, short-term dip in your score (usually only a few points) and are typically visible for 2 years on your credit report and could have minor impacts on your score for up to 12 months but that is nothing to worry about. So long as creditors are not pulling your credit excessively in that time, it is only a couple points lost.

Here are some other ways it could affect your credit:

• New account: A new loan appears on your credit report, which can slightly affect the "average age of accounts" (a minor factor in your score).
• Closing old account: Your old loan will be closed, which might also slightly impact the length of your credit history. However, if refinancing helps you secure a lower payment or rate, making consistent, on-time payments on your new loan can quickly help your score recover and even improve over time. Shopping for rates within a short window (e.g., 14-45 days) usually groups multiple inquiries as one for scoring purposes.

Can I refinance my auto loan with bad credit?

Yes, it is possible to refinance an auto loan with bad credit, but it can be more challenging and potentially not worth the change in a loan. Borrowers with lower FICO® Scores can face higher interest rates, have fewer lender options, sometimes need a creditworthy co-signer to improve chances of approval and potentially secure a better rate. And while not terribly common, some lenders have restrictions for older or high-mileage vehicles for bad credit borrowers. If your credit has recently improved or you can demonstrate consistent payment history, it strengthens your case. Still, it's essential to compare offers carefully to ensure refinancing truly benefits your financial situation.