Best Auto Refinance Options

auto refinance

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When you refinance your auto loan, you replace your current loan with a new one from another lender, possibly with a lower interest rate. You can also shorten, extend, or keep the length of loan the same as the number of months that you have remaining on your current loan.

Typically, the new loan amount will be the balance that’s left on your current loan. However, some lenders will let you take out cash when you refinance. Since there usually isn’t a lot of equity in a car loan, you might end up increasing your risk of owing more than your car is worth when you take out cash.

Either way, receiving auto loan refinancing can help you lower your monthly payments and adjust the terms of your auto loan. But with so many options out there when it comes to auto refinancing companies, it’s easy to get overwhelmed.

Luckily, we’re here to help. So continue reading and we’ll walk you through some auto loan refinancing options of 2020.

LightStream

If you’ve got good credit, then you can take full advantage of it. Whether you’ve had good credit for most of your adult life, or it’s due to a tireless dedication to paying off your debts, now’s the time for you to go out and receive a lower interest rate on your auto loan.

A division of SunTrust Bank, LightStream serves customers with good to excellent credit. In order to use LightStream’s services, you need to have a minimum FICO score of 660.

LightStream executes a hard pull on your credit when you apply. So you should be prepared with a decision when they make that pull.

A hard inquiry can cause your credit score to fall slightly. While this isn’t usually a big deal, it can become a problem if you apply for new credit multiple times in a short period.

But with the autopay discount, LightStream’s APR starts at only 3.49%. And their auto loan refinancing service is available in all 50 states.

CarFinance.com

Unlike LighStream, CarFinance.com caters to people who have poor credit. This will allow you to discuss your refinancing options in a judgment-free environment.

They also have a convenient and easy to use feature – LoanDriver. LoanDriver lets you upload all of your application papers and also stay up to date with the status of your loan application.

During business hours, CarFinance.com will be able to give you a loan decision in less than thirty minutes. If your interest rates were higher when you bought your vehicle, or if your credit score has gone up, then you should apply for a loan.

You need to be current on your loan payments for six months in order to have the best chance of approval as well as to get the best rate. Also, qualifying cars need to have less than 140,000 miles on the odometer and be less than ten years old.

Capital One

After you complete Capital One’s quick and easy survey, you’ll be able to see if you qualify to refinance your auto loan without impacting your credit score at all.

You’ll end up owing more with Capital One than with other loan refinancing companies on this list, though. But you’ll be able to see what types of rates you would get and you can pre-qualify without a hard credit inquiry affecting your credit score.

After you pre-qualify, you’ll submit your credit application. This involves choosing the length of the loan as well as the corresponding APR. This will be posted to your consumer credit report.

You’ll then complete the deal when you provide your VIN, virtually sign the contract, provide your lender details, and send in supporting information such as proof of insurance. Capital One doesn’t charge an application fee. Instead, each state charges a variable fee for title transfer.

Thankfully, Capital One will pay that fee. They’ll then add that fee into your final loan amount so you won’t have to pay out of pocket at the time of your refinancing.

Bank of America

If you choose to get an auto loan refinancing from Bank of America, you’ll get a decision very quickly. Plus, you’re getting your refinancing from one of the most trusted financial institutions in the country. There are no fees to apply and you can take advantage of all of their helpful online features after you become a Bank of America customer.

In order to qualify for auto loan refinancing with Bank of America, your car will need to have less than 130,000 miles on it. It will also have to be less than ten years old. You’ll also need to have at least $5,000 left on your current auto loan.

The current APR for refinancing a car with Bank of America is 3.69% for many states.  For the specific rate in your state, check their website.  A smart move would be to pay off your current loan with the money you save from a new loan. This will enable you to take advantage of lower interest rates, lower monthly payments, and save on financing expenses.

You can use a car loan calculator and compare prices in order to determine how much you would save.

AutoPay

AutoPay’s specialty is in auto loan refinancing. So it makes a lot of sense why they would deliver fantastic deals to their customers. AutoPay tends to cater to customers who have increased their credit scores since they took on their original auto loans.

Because of this, AutoPay usually has the ability to provide big discounts on auto refinance loans. On the company’s website, people are able to compare offers for loans from all different companies. And you don’t have to fill out more than one application.

AutoPay performs a soft pull on your credit, so it won’t affect your credit score. And if you’re not seriously thinking about refinancing your auto loan immediately, then you could benefit from this too.

It’s important to point out that AutoPay will execute a hard check when you pick a final offer. But that won’t be until you’re ready to commit anyway.

It’s also easy to shop around with AutoPay. And the company typically partners up with credit unions.

The lowest rate that AutoPay offers is 1.99%. But that’s only available for people who have excellent credit.

The average rate of interest on an AutoPay loan is 5.50%. And the average credit score of an AutoPay client is 705. By knowing what your credit score is before you start shopping around, you’ll have an easier time estimating what your APR will likely be when refinancing your auto loan.

USAA

Right off the bat, it’s important to know that USAA only serves members of the military or relatives of military members. But if you or a qualifying relative has served our country, then you should certainly consider this nearly century-old company. USAA is well known for its great customer service and hard-to-beat rates.

After you start your auto refinance loan, you won’t have to pay for a maximum of sixty days. This will give you time to catch up if you’re behind. You also have the ability to choose from a variety of their vehicle protection plans, if that’s something you’re interested in as well.

With USAA, you can get refinancing for up to sixty months. And there are terms available that are even longer. This company makes refinancing easy thanks to the fact that they work directly with your lender.

You can find USAA’s rates right on their website. When you include the 0.25% discount that comes with selecting autopay, rates with USAA start at just 3.05% APR.

It’s worth knowing that these rates can be changed without notice. And the actual rate will vary depending on approved credit and other factors, such as loan amount, model year, and term of the loan.

LendingClub

If you’re looking for peer-to-peer lending, then look no further than LendingClub. While this type of lending isn’t a traditional option, it’s a great choice for people who want to work directly with an individual lender for a specific amount of time.

With that said, LendingClub isn’t a great option for people who don’t owe a lot of money on their current auto loan. The loans from LendingClub go all the way up to $100,000. But you won’t get a loan for less than $5,000 for auto loan refinancing.

LendingClub does offer loans to people who have credit scores that are less than 510. However, you are going to have to pay a good amount for that privilege.

Many people decide to go with LendingClub because they offer low-interest rates and they’re easier to work with than more traditional financing options. You also don’t have to worry about prepayment penalties, hidden fees, or rude customer service when you patronize LendingClub.

Consumers Credit Union

Because this a credit union, you’re going to have to actually be a member of Consumers Credit Union in order to take advantage of their auto loan refinancing services. However, after you become a Consumers Credit Union member, you’ll soon be flooded with perks and benefits.

Unlike most other banks and auto loan refinance lenders, the loan terms from Consumers Credit Union are extremely flexible. This is especially true if you don’t have to borrow a lot of money. CCU will lend you as little as $250 for just six months at a time.

They will execute a hard check on your credit score, so you want to make sure that you’re serious about refinancing with them before you see what rate they’ll give you. Otherwise, your credit might suffer.

After they check your credit, though, they’ll work with you as long as you have a credit score that’s over 650. The current APR for auto loan refinancing starts at just 2.50%. Of course, your credit history and the length of your loan will affect your actual APR.

The Importance of Knowing About Your Auto Loan Refinancing Options

If you have an auto loan that you want to refinance, it’s crucial that you select a lender that will give you the best deal available. If you don’t, then you may not be saving as much as you should be. And when you go shopping for loans, it’s important that you explore your options when it comes to auto refinancing companies.

So make sure that you go over the above list and see which companies are most likely to fit your lifestyle and financial needs. And even if you don’t think you need to do any auto loan refinancing right now, it’s still good to know what your options are. After all, we could all benefit from saving more money.

Frequently Asked Questions

Refinancing a home mortgage is common, but is auto loan refinancing worth it? If you do it right, you can save more than enough money by refinancing your car loan to make it worth your time and effort. Not only can you potentially lower your monthly payments, but you may also be able to reduce the interest rate and change the length of the loan. Auto loan refinancing is also an opportunity to take your current car loan to a financial institution that you already have a relationship with.

What is auto loan refinancing?

Auto loan refinancing is replacing your current loan with a new one from another lender, most likely with a lower interest rate.  In most instances, 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, but this is generally looked down upon due to the lack of equity in a car loan.

Should you refinance your auto loan?

If you are interested in saving money on your current auto loan, it may make sense to consider refinancing your car loan.  Typically, consumers can lower their interest rate by an average of 2.4% and their monthly loan payments by more than $50 through auto refinancing.  Even though interest rates are going up slowly, you can still find plenty of ways to save money via auto loan refinancing.

When should you refinance your auto loan?

If interest rates have generally gone down since you took out your original auto loan, you should consider refinancing. Even a decrease of just a couple of percentage points can save you a lot of money over the long term.

However, just because interest rates have dropped, doesn’t mean you’ll actually qualify for those rates. Having an improved credit score can be a major factor in getting overall better terms when you refinance.

And if you’re facing financial difficulties, it could be worth renegotiating the repayment terms on your auto loan. By lowering how much you pay on your monthly bills, you’ll be able to save more. And if you’re not happy with your APR, it could still be worth shopping around, even if your credit situation hasn’t changed all that much.  Check out our list below for the best reasons to refinance your auto loan.

When you want to get a better rate

Really, there is no time like the present.  Sometimes, you just don’t get the best deal when you first finance your car.  If your current car loan interest rate is well above what the current advertised interest rate is, it may make sense to explore getting an auto refinance.  By going from a high interest rate loan to a lower interest rate loan, you can quickly save money on your monthly payments.  Always look back at copies of documents you’ve signed to see the original interest rate on your loan and, if it is higher than current market rates, find a lender that can offer better terms than you are currently saddled with.

When you want to move your loan to your primary bank or credit union

In many cases, it is beneficial to move your auto loan to the bank/credit union where you do most of your business as it makes it easier to work with the loan by setting up automatic payments straight from your bank account to your auto loan.  Also, if issues arise with payment not being applied to your loan, working within the 4 walls of one institution makes it that much easier.

When you want to change the length of your loan

With an auto refinance, you can update the loan term to lengthen or shorten it depending on your monetary situation.  For instance, if you are looking to lower your monthly payments, you may want to extend the length of your loan to make the monthly payments easier to make.  Of course, you could also go the other way and shorten your length of your loan term if you want to save money in interest over the course of your loan.  Plus, a shorter term vehicle loan will usually come with a rate discount that will save you additional cash.

When your credit score has improved

If you got your original car loan with bad credit, you may have seen your credit score steadily improve through making on-time payments. This, coupled with the fact that you have lowered your car loan balance over time, lowering the LTV ratio, making the loan more manageable to a new lender.

As your credit has improved, you may start to qualify for much better rates than you did at the time of your old loan.  With a new, lower rate, you may be able to lower your monthly auto payments significantly, shorten your loan term or some combination of both.

How Do You Compare Auto Loans?

The main factor when comparing auto loans should be the total cost through the life of the loan.  This includes all of the interest that you have to pay.  Take the amount of the loan, the interest rate and length of the loan to determine the monthly payments, and then use the number of months in the loan term to determine the cost.  Ideally, you will want to have the shortest auto loan possible that you can feasibly afford the monthly payments on.  These shorter loans usually have lower interest rates and lower prices, but you also run lower risk of owing more for your vehicle than it is worth (being upside-down).

Where to get an Auto Loan Refinance?

Traditionally, you can refinance an auto loan at most of the same places you can get an auto loan i.e. national banks, both online and brick and mortar, community and regional banks (especially good when running promotions with rate discounts), and credit unions.  According to TransUnion, credit unions account for most of the auto loans that are refinanced and typically provide lower interest rates to their member than other financial institutions.  Another avenue you can look at is to your current financial institution where you have a relationship via savings accounts, mortgages or credit cards.  These institutions are typically more motivated to make you a good car refinance offer to stay with them as a preferred customer.

What will car refinancing cost me?

Most auto loans carry no prepayment penalty and no startup fees.  The true investment is your time to go through the application.  There are a few car loans that have prepayment penalties that are there to urge you not to refinance your loan, so you may need to wait months or years before you can officially refinance.

Can you refinance your car with bad credit?

It may be possible to refinance your car with bad credit, but it’s not easy.  If you have made 6-12 months of on-time payments, a lender may be able to work with you.  The key to this will be to apply to multiple lenders because most lenders have different credit score requirements based on their risk tolerance.  If your credit is declining from when you took out your original car loan, you may have more to lose in getting an auto loan refinance unless you really need to get lower monthly payments through extending your loan term.  Getting a new loan with bad credit can be difficult, as each lender will pull a credit report inquiry that has the potential to adversely affect your credit score a few more points further.

If your car is almost paid off, can you still refinance?

Usually, it does not make any sense to refinance if you are nearing the end of your car loan.  Payments made in the last year or so of your loan go mostly to the principal and not the interest, so any savings you may get from refinancing at a lower rate would be super small and usually not worth the effort.  Especially with potential lender fees due to the lack of profit your lender would make on the refinance.

Can you refinance when you’re upside-down on your current loan?

If you have good credit, you may be able to refinance to stop being upside-down on your car loan.  This is highly dependent on your loan-to-value ratio or LTV.  Depending on what your car is worth and how much you are looking to borrow, you may need to make a cash payment to get the LTV in your favor.  There are also changes you can make to the loan term by shortening the term of your new loan to reduce the overall interest you’d pay over the life of the loan.

What are the final steps of completing an auto refinance?

You need to make sure that all of the proceeds of the new loan are used to pay off the full balance of the old loan.  Auto loan refinancing requires the vehicle’s title to be transferred from the original lender to the new lender that is doing your auto refinance.  Finally, you will need to verify that you have the car insurance that is required by the institution that has your new auto loan.  Lenders require various limits and deductibles, but the insurance required by lenders is legally required in most states.

What if you can’t make your monthly car payments?

Communication is key if you are going to miss your monthly car payment.  Many times a lender will be able to defer payments for a short while or find another solution that works for you.  While deferring payments, interest will still accrue which you may need to make up for in an extra car payment, but in reality the lender is as invested as you to not default on the loan.

Who is the best lender to refinance with?

While LowerMyBills doesn’t recommend one specific lender, we do have a good list below of some of the best lenders for auto refinancing that we have found.  It is important to apply to multiple lenders, however, so you can truly find the best rates and best loan terms that fit your unique situation.

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