How do I Refinance a Car Loan?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 26 February 2020
  • Copyright Protected:
    Conjecture Corporation
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Even with the best car loans, you may choose to refinance the loan at some point. Your desire to refinance a car loan may arise out of a desire to stretch the budget by creating lower monthly payments, or you may need to borrow additional funds in order to have work done to the vehicle. Fortunately, there are many lenders who are willing to refinance an existing car loan as long as the borrower meets the basic qualifications.

Before you begin to look for a lender who will refinance a car loan, it is important to determine how much your vehicle is currently worth. This means having your car appraised. The appraisal will take into consideration such factors as depreciation, the general condition of the vehicle, and the amount of mileage currently logged. This will allow you to determine if lenders are likely to refinance your loan for the amount you want. As long as the worth of your car exceeds the amount you wish to refinance, there is a good chance you will find lenders willing to talk with you.


Armed with your appraisal, a good place to begin is with your current lender. Assuming your payment record is good and your finances are in order, there is a good chance that you can work with your existing lender to refinance a car loan. If you want to borrow additional funds in order to handle a financial need or just want to get a better interest rate, the lender may be willing to work with you in order to maintain your business.

However, there is no reason to refinance a car loan with the first offer you receive. Instead, use the quoted terms you received to do some shopping. Check with other lenders in the area and see what interest rates and monthly payments they can offer. There are a number of lenders who will happily write used car loans as part of the refinancing process. Collect at least four or five quotes, making sure the terms and conditions in each quote are comparable.

With both used cars and new cars, purchasing terms may vary from one lender to another. One thing to look for carefully is the inclusion of some type of insurance protection. Many people choose to refinance a car loan on the basis of a lower monthly payment or a lower interest rate alone. However, if the former financing included charging a small amount each month to maintain auto insurance on the vehicle and the new financing does not, the car owner may quickly find there was not savings at all. Since the goal is to better your financial situation, it is imperative to make sure you benefit from the refinancing and do not lose any of the benefits you enjoyed with the original loan.



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