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Refinance Car Loan or Auto Loan

Refinance Car Loan or Auto Loan
Mark Cappel
UpdatedDec 1, 2010
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    4 min read
Key Takeaways:
  • 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

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 pre-approved lenders or check out the information hub on mortgage refinance loans on the refinance loan page.

Quick Tip No. 1

The 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!


SShannon, Feb, 2014
I entered into a debt consolidation program a year ago. My credit took a drastic hit unfortunately, but it didn't matter to me at that time. Four months later, my husband and I separated and now I'm trying to make ends meet being on my own. With the high delinquency of my accounts and the debt consolidation plus my lower credit, can I refinance my car loan to lower payments? I'm currently at a 9.1% APR. And if I can, what are some good companies to refinance through since USAA said I was too delinquent on accounts to refinance.
BBill, Feb, 2014
Unfortunately, if your credit took a drastic hit and shows many delinquent accounts, then I don't believe you will be able to refinance, let alone to a rate better than you have.
SSylvia Garcia, May, 2015

Dear Shannon, Were you able to find a company to refinance your auto loan? I have been looking to refinance my current auto loan and all the websites that claim to help people with a past "BK" haven't been able to approve me.. I'm not sure if its because of the upside down amount loan-to-value approximately like $6k or there is something that I'm missing which is not allowing me to become a good candidate to approve for a refi. If you can provide me with information that would be very helpful, most of the info I find is like over 4yrs old and I'd like more updated information. Thanks :)

DDaniel Cohen, May, 2015

There are no lenders of whom I am aware that will refinance an auto loan for someone who owes more than the vehicle is worth.

SSylvia Garcia, May, 2015

Thanks for the what I understand is that all these website companies that claim that they'll refinance your auto loan even if you are upside down on the loan and if you have bad credit etc.. Are completely and bluntly lying? If so, they give people the wrong idea and advertise incorrect information and that is truly sad. This is why the system is so messed can we do the right thing if the information provided is wrong. As for not financing a car loan because the loan to value is upside down.. I thought that this is what finance companies do all the time.. once a car is driven off the lot the car automatically looses value.. I'm truly confused now :/

DDaniel Cohen, May, 2015

Unfortunately, I do think that the sites you saw that say that they will refinance a car for more than it is worth, even for people with bad credit, are trying to take advantage of vulnerable people. You are 100% right that such information confuses people and makes it hard to find the right solution.


When a finance company finances a new car purchase it is never for more than what is owed. A buyer almost always makes a down-payment. Even if there were 100% financing, it would not be for more than the car is worth. You are correct that a car drops in value as soon as it is driven off the lot, but that still doesn't mean that when the car was financed it was underwater.

DDavid, Jul, 2012
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.
BBill, Jul, 2012
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.
TT, Mar, 2012
Where are some of the places to go when you have bad credit?
BBill, Mar, 2012
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.