Refinance Car Loan or Auto Loan

Bills.com Team
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Highlights


  • Most bad credit borrowers can indeed refinance to a lower APR.
  • Vehicle refinancing can be easy.
  • Evaluate all of your car and auto loan refinancing options
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Car loan and auto loan refinancing is fast and easy and works in the same way as a home refinance.

If you own a car free and clear with no loan, or even have a small car loan balance remaining, many Americans wonder: “Can I refinance my car loan?” The quick answer is YES! The challenge, however, is that this is a non-traditional refinance loan market, so you have to be a good candidate with good credit and you have to find the right lender.

Typically, we recommend you start by trying to refinance an auto loan or car loan refinance by beginning with a more traditional refinance product: the mortgage refinance loan. You can refinance your mortgage (if you are a home owner with good credit, good debt to income and a decent loan to value ratio) and consolidate your auto / car loan into your new loan. The big benefits here are a lower interest rate, and interest that is tax deductible; which means the effective cost of this new loan is much lower than a new auto loan. You can apply with Bills.com pre-approved lenders or check out the information hub on mortgage refinance loans on the Bills.com refinance loan page.

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The Bills.com Debt Coach offers non-nonsense information about your debt relief options, and will give you the pros, cons, and costs for each.

When you first bought your car, you might not have found the best financing deal, or as happens with many Americans your auto loan was an afterthought and you probably didn’t get the best interest rate or auto loan. You could have taken out your car financing through a car dealer at an interest rate that is possibly higher than lenders or financing sources. This could be one of the reasons why you are currently paying way too much for your current car loan. If your credit is excellent, or if you have significant equity in your car or in your home even, then now just might be the optimal time to look into refinancing.

Car loan refinancing can be easy. Once your car loan refinancing application has been approved, your current loan will be paid off by the new car loan and you will now have a new loan. Ideally, with a lower interest rate you will be making payments that are lower than you have been previously paying. You could be surprised at how much you can save with a refinance. Your savings could amount to hundreds, even thousands of dollars over the course of the loan, depending on how much your new interest rate is charged on your car loan refinancing deals.

Car loan refinancing may be a very promising way of saving you money but most people have not thought of refinancing their cars. You can say that car loan refinancing works in the same way as home refinance. In car loan refinancing, you pay off your current car loan with a refinancing car loan. This time the loan comes from a different lender with a lower annual percentage rate, making your monthly car loan payments much less with interest rates that have dropped, while allowing you to pay off the balance of your car loan in a shorter span of time. Car loan refinancing has become a very popular trend because of the dropping interest rates. Use the money you save through your car loan refinancing to pay off credit card debt or accelerate your car loan payoff.

This is exactly the reason why people with bad credit who are paying a high APR need to apply for a car loan refinancing with low APR. Most bad credit borrowers can indeed refinance to a lower APR but many don’t think to try because they were “programmed” or duped by the dealer into thinking they are stuck at the higher APR they have imposed.

It’s very important to have a car loan refinancing early, because with car loans, the interest is mostly paid in the earlier payments. The earlier your car loan refinancing is approved, the more money you save. In addition, beware that some auto loan contracts charge the interest as a “finance charge” which will be due regardless of whether the loan is paid off early. Read your contract carefully and make sure that you are able to pay off the loan early without having high finance charges.

Consider evaluating all of your car and auto loan refinancing options. You may be surprised by how much money you can save just by lowering your interest rate. Refinance your car loan today!

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13 Comments

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  • 35x35
    Jul, 2012
    David
    I have a question because I am new to this. When attempting to refinance my car loan, It seemed that my APR would be cut in half but my payment would only be reduced by $20. Why is this? It does not exactly seem worth it go through the trouble for $20.
    0 Votes

    • 35x35
      Jul, 2012
      Bill
      It is possible that your monthly payment would be reduced by $20. For example if you have a $7000 loan for 4 years, your current interest rate is 12% and you refinance to a 6% loan, then your payments will decrease by $20. That is a saving of $960 over the four year period. Naturally your savings will be offset by any fees you have to pay for the loan. Only you can determine if the effort to refinance is worth the savings. Good luck.
      0 Votes

  • 35x35
    Mar, 2012
    T
    Where are some of the places to go when you have bad credit?
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      There are dealers and online companies that specialize in auto loans for borrowers with bad credit. Interest rates can be sky-high. If you can save up enough money to buy a cheap used car for cash, while you work to improve your credit score, it is worth going that route. You may not have as nice a car for a few years, but you will not increase your debt and be stuck with high interest rates.
      0 Votes

  • 35x35
    Oct, 2011
    Jean
    I have 3-4 Payday Loans (PLS, First Cash, CheckNGo) and ended up getting a Title Loan on my car which was a gift from my mom - (Title Masters) repo'd my car for non payment - now I am in the hole for payday loans and no car. How can I get out of this mess!..HELP PLEASE!>
    1 Votes

    • 35x35
      Oct, 2011
      Bill
      I wish I could offer you an easy solution. Unfortunately, you've put yourself in a tough position with no easy answer. One thing you have to understand is that you can't borrow your way out of debt.

      Try making a budget, so you can live within your means. Figure out what it is that is causing you to regularly need to borrow money that you can't afford to pay back.
      0 Votes

  • 35x35
    Sep, 2011
    Lucy
    Very helpful information!!! I wish I would have known about refinacing on a car loan. I purchased a nissan pathfinder Le several years ago and the dealer did not inform me of refinancing.
    0 Votes

  • 35x35
    Mar, 2011
    Joe
    I am now considering going for refinancing of my new auto loan. It is so helpful
    0 Votes

  • 35x35
    Feb, 2011
    Mary
    Very helpful information, but I still have a question. What if you have a great rate, but still can't make the monthly payments? For example, I managed to lock in on a 0% APR rate last year for a new car that I really needed. However, the monthly payments are too much for my husband and I to handle anymore. We pay about $325 a month on this car, and we've fallen behind by at least 2 months. Is there any way to qualify for a lower monthly payment with an extremely poor credit score?
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      Mathematically, the way to cut your monthly payment is to refinance to a loan with a longer term. In other words, if your present loan is 36 months, refinancing to a 60-month loan will result in a lower payment, assuming identical interest rates. The problem with your situation is you are now two months behind. You will find it difficult to refinance if your credit report shows you are two months delinquent. If you cannot afford the payment, then you have no choice but to notify the lender you must return the vehicle.
      0 Votes

  • 35x35
    Nov, 2010
    Barbara
    Can you get cash out when you refinance a car loan? I would love to do a cash out refinance car loan.
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      Yes, a cash-out vehicle refinance is possible in theory. This is one instance in life where shopping is the solution to your problem. If you have an existing loan on your vehicle, call the lender and ask about refinance options. See the Bills.com Cash Out Refinance page to get no-cost quotes from pre-screened lenders.
      1 Votes

  • 35x35
    Nov, 2010
    virginia
    Helpful article
    0 Votes