You found the car, truck or SUV that suits you and financed the purchase with a monthly payment that fit your budget. Still, you may have a nagging feeling that there is a better deal available, whether that means lowering your payment or paying off the vehicle sooner. If this sounds familiar, it may be time to consider refinancing your auto loan.

Refinancing may be worth considering if:

• Interest rates have dropped since you took out the original loan
• Your credit score has improved enough that you may qualify for a lower rate
• A shorter or longer loan term would better fit your current budget

Before applying, compare the new rate and monthly payment with any fees, the length of the new loan and the total interest you could pay. A lower monthly payment may offer some breathing room, but it does not always mean that you will pay less over the life of the loan. Read on for answers to some common questions about auto loan refinancing.

Can You Refinance an Existing Auto Loan?

Yes! Getting an auto refinance loan is basically the same as any other loan. The general criteria remain useful for deciding if you are likely to qualify for a new loan. The key components are your credit score, your debt-to-income ratio, and your current income. If you have made changes that have raised your credit score or your income has increased, you might be in good shape to substantially improve the interest rate you are offered. You will want to make sure that the vehicle you are looking to refinance has not suffered damage or passed the age at which your potential lender will consider for financing. Many lenders use 10 years as the cutoff for refinancing, but feel free to check in with one of our lending specialists to see if your older vehicle may qualify. 

How Does Refinancing an Auto Loan Work? 

Basically, a refinance auto loan pays off your current auto loan and moves the financing of your vehicle to a new loan, usually at a different lender. Many who qualify for a lower rate use the refinanced auto loan to lower their monthly payment, while others compare new financing opportunities and current vehicle loan rates before choosing the best option. When you are considering refinancing, the rate you are offered is a big factor, but there are a handful of other things to look out for. Fees are the chief impediment to getting the best deal in the long run. If your current loan has a fee for early payoff, it might eat into the savings you would hope to see from a lower interest rate. Other fees to watch for are transaction or processing fees accompanying the new loan. Use a loan calculator to clarify just how all of the factors may affect your situation: interest rate, fees, change in loan term, would affect your budget, your total payoff amount, and the total amount you will pay in interest. 

How Soon Can You Refinance a Car after You Buy It?

When you financed your car initially, the title was sent to the lender. In some states, you will get the paper title with the lender listed as lienholder. If you bought it less than 90 days ago, neither you nor the lender may have received the title yet, and that is the baseline for starting a refinancing process. It is generally thought a good idea to wait for at least 6 months after your original loan, as that will also give time for your credit score to rebound after the usual dip that occurs when you take out a new loan.

Another time factor to consider is not how soon, but how late can you refinance. If you have fewer than 24 months left on your loan, you will want to be certain that the amount of interest you will save is worth the time you put into the process to refinance.