How to Refinance an Auto Loan

Car loan refinancing document

Advice to help you decide whether refinancing your car loan makes the most 'cents', and tips to show you how

When it comes to refinancing your auto loan, there are a number of factors to consider before you do.  In this section, we offer advice to help you decide whether an auto loan refinance makes sense for you, and tips to show you how, if you decide you should.

The Basics of an Auto Loan Refinance

In essence, an auto loan refinance pays off your existing car loan with a new loan.  Your current auto loan and title are transferred to the new lender, to which you make monthly car payments.

Important Car Loan Refinance Consideration

When it comes to refinancing your auto loan, consider the following:

If you obtained your loan through a dealer, chances are you probably paid a higher interest rate.  Dealers tack on additional points and fees to loans as profit margins, which means that even though you got a great deal on the car you bought, you probably didn't get the best deal on your financing.  If your car is financed through the dealer, you might want to consider an auto refinance.

If you owe more for your car than its current market value (known as being 'upside down'), an auto refinance might be able to correct the situation.  Nobody wants to be in the position of selling or trading their car, only to find out the money they receive for the car doesn't cover the remaining loan balance.

If your interest rate is higher than it should be and rates have fallen since you first secured your loan, it's probably a good idea to refinance your car loan to get a lower rate.

If your monthly car payments are too high and you refinance to a lower interest rate, the cost of your monthly car payments should decrease.  However, beware of longer term loans since this is a sure way of becoming upside down in your auto loan.

The Best Way to Refinance your Car Loan

The best way to refinancing your car loan is to start at, where you can compare auto loan offers from up to four different lenders.  By comparing multiple lenders and multiple rates, you can find the refinance terms that make the most sense for you. And don't forget to review all the terms of the loans, since different terms can mean different rates.

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