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You might consider refinancing your auto loan if you’ve found a lower interest rate or better repayment terms than what you’re paying now. In most cases, you can refinance your car loan any time you want, but that doesn’t mean you always should. Here’s more details on when you can refinance a car loan, what the requirements are and whether it’s the right move for you. Can I Refinance a Car Loan?If you took out an auto loan, you can probably refinance it. Keep in mind that there are some instances where you might not be ready to refinance your car loan just yet, however. Before you decide to refinance, you should make sure to do the following: Read the terms and conditionsRefinancing an auto loan is like refinancing any other type of loan: a new loan is taken out to pay off your existing loan, and then you make payments to your new lender. If your current lender has prepayment penalties, that means you could get hit with a charge if you pay off your existing auto loan before the prepayment terms are up. You might be able to skip out on the prepayment penalty if you wait a little bit longer to refinance—so check your lease terms and do the math. If the penalty amount is higher than what you’d save when you refinance, it might not be worth it. Not all lenders have this penalty, however, so it’s critical to view your loan terms first. Find out the new lender’s requirementsIf you’re planning to refinance with a new lender, you might have to meet some minimum requirements first.
How Soon Can I Refinance a Car Loan?You might be able to refinance your car loan within a few weeks of buying it, but it depends on where you bought your car, your lease terms and the new lender you’re considering for refinancing. Since paperwork can take a while to process, you might want to wait until you’ve made at least your first payment to your new lender. This helps you avoid missing any payments so you can stay current on your loan and your credit score doesn’t take a hit due to late payments. When You Should Refinance an Auto LoanIf you’re thinking about refinancing your car loan, it makes sense if:
When You Shouldn’t Refinance an Auto LoanOn the other hand, you might want to avoid refinancing if:
Related: What Is The Average Car Payment? Compare Rates and Save on Your Auto LoanGet up to 4 loan offers in minutes at myAutoloan.com. Frequently Asked Questions (FAQs)Will refinancing hurt my credit score?Refinancing will trigger a hard credit check, which causes your credit score to temporarily take a dip. This normally rebounds after a few months of on-time payments, though. Should I refinance my car loan?You should consider refinancing your car if you have good credit, are guaranteed a lower interest rate than what you’re paying now or can get more favorable terms. Also, make sure you’re eligible to refinance before completing an application. You may want to skip refinancing, though, if you face a hefty prepayment penalty with your current lender, your credit score hasn’t rebounded from when you took out your latest auto loan or you can’t get a better interest rate. If you’re planning to take out another loan soon, like a mortgage, it’s likely best to skip refinancing for now. Refinancing your auto loan will temporarily drop your score, causing the interest rate you get on a mortgage to be higher than it would be otherwise. Can you refinance a car loan with bad credit?There’s a chance you might qualify for refinancing with bad credit, but that doesn’t mean you’ll get a lower interest rate than what you’re paying right now. Try to improve your credit score before refinancing so you qualify for the lowest interest rate and the best terms for your needs. Can you refinance a car that is paid for?If you recently bought a car, you may wonder when you can refinance your car loan to reduce the interest rate or lower the payment. Strictly speaking, you can refinance a car loan as soon as you find a lender that will approve the new loan.
When should you not refinance a car loan?3. Interest rates. If the interest rate you qualify for today is significantly lower than your current loan rate, it may be a good time to refinance a car. If it's the same or higher, it's probably not the right time to refinance.
Can you get denied for refinancing a car?There are many reasons why a lender may deny your application for auto refinancing. Under the Equal Credit Opportunity Act (ECOA), you have the right to know why it was denied. If you don't get the interest rate you expect or the lender says it won't handle your auto refinance, ask questions.
Can a buy here pay here hurt your credit?Getting a loan from a BHPH dealership typically will not negatively affect your credit score. Even missing payments or getting the car repossessed will typically not show up on your report. In terms of credit score, there's not much to lose when working with a BHPH dealership.
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