Understanding Pre-Approval: Why It Matters Before You Shop for a Car
May 25, 2025
Can You Refinance Your Car Loan? When It Makes Sense and How to Do It
May 25, 2025
The Top 5 Companies For Auto Refinancing
Mar 12, 2025
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8.9
Auto Approve
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10,877Reviews
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Gravity Lending
Fast application process, no fee to apply
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RateGenius
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myAutoloan
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What is Auto Refinancing?
For many customers, an auto loan company can be an added stressor on top of an already complex situation. Making a major spending decision on a car can be difficult, and entering long-term debt is a choice customers should always make after careful consideration. In many cases, borrowers do not receive the most favorable terms for their loans due to a variety of factors. These can include existing debt levels, poor credit, or even signing for a loan at the same place where and you purchased your car.
While the situation may seem challenging for customers saddled with high interest rates and unrealistic payment schedules, there is a mechanism available that may help improve your financial situation easily. By researching how to refinance a car loan, customers may be able to take out extra funds to cover the full amount of existing debt while getting better repayment terms and, in some cases, lower auto refinance interest rates.
Auto Approve
Auto Approve is a loan aggregator specializing in car refinance for all types of vehicles, including boats and ATVs. Auto Approve can frequently get you a better auto refinance deal than you could access yourself.
Pros | Cons |
Accepts almost every type of vehicle | Doesn't fit bad credit borrowers |
Wide lender network of financial institutions | Does not offer purchase loans |
Why Consider a Refinance Auto Loan?
There are many reasons why customers might look to auto loan refinance. By improving the terms of your car financing, you can potentially relieve stress, lighten your financial burden, and save money over the long run by avoiding paying unnecessarily high interest rates. These are just some of the reasons why customers choose auto refinancing:
- They received suboptimal terms on their original auto loan: This is a frequent problem many auto buyers have when applying for financing. Most people are happy to have their car dealer act as their lender, and are willing to forgo better terms for the sake of convenience. Loans extended by vehicle dealerships tend to have less favorable terms and higher interest rates than those originated by a bank or an alternative or online lender. These kinds of loans may also include extra riders and fees that may be hidden and eventually raise the overall loan costs.
- Interest Rates Have Fallen: It is not uncommon for overall lending and financial conditions to change over time. In many instances, customers may have taken out an auto loan at a time when economic conditions were difficult, leading to higher interest rates. In these cases, a refinancing auto loan can potentially ease the financial impact of the existing loan without deepening existing debt or overpaying for a loan.
- Borrowers’ Creditworthiness Has Improved: For some customers, a vehicle is a necessity regardless of their creditworthiness. This can lead to borrowers accepting higher interest rates and weaker terms when purchasing their car. However, over time, credit scores can be improved and customers can make great strides towards restoring their personal finances. Once you've managed to boost your credit score and are no longer looking for a car loan with bad credit, you can refinance your loans to help towards gaining more favorable terms and better interest rates. In the long-term, this refinancing could potentially save thousands over the life of your auto loan—even if you have a car loan with negative equity.
- Customers’ Financial Conditions May Worsen: In a few cases, customers who have seen financial situations deteriorate since taking out the original car loan can be faced with payments that were once realistic but have turned unfeasible. In these situations, you can seek to refinance your loans to extend repayment terms and lower the amount you must pay every month.
What Does It Mean to Be Upside down on a Car Financing Loan?
Cars depreciate quickly, as much as 20% or even more when you drive them off the lot. When someone is “upside down” on a loan, it means they owe more on the car than the vehicle is worth. This is also known as a negative equity car loan. Having an auto loan with negative equity means that you can’t recoup what you owe on the loan by selling the car (although with depreciation you may be in this position anyway). One way to avoid an upside down loan is to pay a bigger down payment, which will also result in lower monthly payments. If possible, we suggest to continue driving the car long after you’ve finished paying it off, to make up for the negative equity.
Factors That Impact Auto Refinancing Options
Before choosing to refinance your car, it is important for borrowers to take stock of their current loan and determine the various factors that might affect their ability to get the most favorable terms possible. Before signing with one of the many auto refinance lenders out there, we suggest considering the following:
Refinancing Requirements: When looking for refinancing loans, it's important for customers to understand their preferred lender’s requirements to extend funds. These requirements can include a minimum amount of outstanding debt, remaining time on an existing loan, or conditions specific to the vehicle being refinanced, such as total number of miles or age of the vehicle.
- Current Income: Customers that have improved their financial standing in the years since their original auto loan was issued may seek refinancing to pay off their loan quicker or improve their interest rates. On the other hand, customers whose income has decreased since purchasing their car could potentially utilize refinancing to extend their repayment term and lower their total monthly payments to more feasible levels.
- Remaining Payments on Original Loan: In some instances, extending the terms by refinancing an outstanding loan can result in lower payments, but cause the overall amount remaining to rise if interest rates did not change significantly. For customers with shorter remaining repayment terms, refinancing may only make sense if they can decrease their interest rates without significantly adding to the duration of the loan term.
- Credit Scores: Depending on changes in your credit scores since the time of your original loan, certain borrowers may benefit from auto refinancing. If your credit has improved, you may be able to refinance your bad credit car loan to one with better interest rates and more favorable repayment terms.
How to Refinance a Car Loan
Finding a great new auto loan refinance option can be a convenient process if customers are thorough when applying. To find the best refinance car loan, we recommend customers take these steps:
- Get Everything in Order: The first step towards finding the best auto refinancing loans with the lowest rates available is to be prepared. We recommend setting a budget, checking your credit scores, and repairing them if necessary. In addition, collect all the most up-to-date paperwork on both the car and the loan being refinanced. Finally, it's important to understand the ultimate goal of refinancing the outstanding loan.
- The Right Auto Financing Solution: While many customers may lock themselves in to a dealership loan when first purchasing a car, auto refinancing may be offered by a wide range of banks, financial services providers, and alternative lenders. It's recommended to always be thorough during the search for the right refinance lender, looking for reliable lenders that have a proven track record, offer the terms and rates you're looking for, and demonstrate a willingness to work with borrowers on your terms. This applies to smaller lenders as well as car refinance banks.
- Choosing the Best Available Lender: Once a potential lender list is narrowed down, we recommend taking some time to ensure that the chosen is one that can check off all your requirements for a new loan. This includes checking that they're offering the right interest rates and terms, favorable fees, and that they have a strong reputation.
- Prepare all the Documentation: Once customers have chosen and been prequalified for a refinancing loan, they will be required to present a series of documents that include identification, proof of income, documentation on the car along with details on the loan being refinanced. You can speed up this process by having this documentation ready to submit.
- Pay the Lender and Start New Repayment: Once approved and completed, the final step for a borrower is repaying the remaining balance on the original car loan debt before beginning to repay the new refinancing loan. This can be done either by the customer after receiving the total amount of the new car loan, or in some cases, may be handled automatically between loan providers.
Finding the Best Auto Refinance Lenders
No matter the reason to do so, an auto refinance loan may offer excellent value for borrowers seeking to improve repayment terms and help to fully repay an auto loan without breaking the bank—even if it's the best bank to refinance your car. By refinancing, customers can lower monthly payments, reduce the total amount paid by lowering car loan interest and consolidation debt from other loans, or adjust the duration of the loan repayment period. This can be especially true if you're aiming at refinancing with negative equity on your auto loan. For any situation, it's always a good idea to narrow down the best auto refinance loan lenders with our in-depth reviews, expert research, and fair comparisons.
Disclaimers
Caribou:
*APR is the Annual Percentage Rate. Your actual APR may be different. Your APR is based on multiple factors including your credit profile and the loan to value of the vehicle. APR ranges from 5.48% to 28.55% and is determined at the time of application. Lowest APR is available for a 36 month term, to borrowers with excellent credit. Conditions apply. Advertised rates and fees are valid as of 9/11/24 and are subject to change without notice.
¹ This information is estimated based on consumers whose auto refinance loan funded through Caribou between 3/1/2023 and 3/1/2024, and had an existing auto loan on their credit report. These borrowers saved an average of 3.66% on their APR. There is no guarantee of savings. Your actual savings, if any, may vary.
² This information is estimated based on consumers whose auto refinance loan funded through Caribou between 10/1/2023 and 9/30/2024, and had an existing auto loan on their credit report. These borrowers saved an average of $130.83 per month, with annualized savings of $1,569 per year. Refinance savings may result from a lower interest rate, longer term, or both. There is no guarantee of savings. Your actual savings, if any, may vary based on interest rates, the repayment term, the amount financed, and other factors.
Gravity:
*Monthly Savings: Average monthly payment savings shown was calculated from all funded loans between August 1, 2023, to August 31, 2023. Payment is a calculation of the approved interest rate, selected term, and amount financed. Your actual savings may differ, more or less, and you can typically customize many aspects of your loan to find the savings you seek.
Upgrade:
Auto refinance loans through Upgrade feature Annual Percentage Rates (APRs) of 5.24%-17.94%. Lowest rates require Autopay. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Eligible vehicles must be 10 years old or newer and have less than 130,000 miles (or less than 150,000 for trucks).
PNC:
Annual Percentage Rates (APRs) for loans amounts from $5,000 to $100,000 with repayment terms from 12 to 72 months currently range from 5.89% to 23.04%. Available rates within this range may vary by loan amount, repayment term and model year.
The lowest rates are available to well-qualified applicants. Your actual APR may be higher than the lowest available rate and will be based upon multiple factors such as credit qualifications, loan amount, repayment term, model year, automated payment from a PNC checking account and number of days to first payment.
APRs include a 0.25% discount for automated payment from a PNC checking account. Automated payment must be set up at loan closing to qualify for the 0.25% discount. If automated payment is discontinued, you may no longer receive an automated payment discount and your rate will increase 0.25%.
Model Years: Auto Loans to be secured by a 2014-2023 model year non-commercial vehicle with up to 100,000 miles. Repayment term restrictions apply for vehicles with model years 2014-2017. Certain restrictions apply for mileage from 80,000 to 100,000.
Credit is subject to approval. Certain restrictions and conditions apply. Rates are effective as of 11/13/2022 . Rates, terms and conditions are subject to change at any time. For more information, visit pnc.com/(URL for auto refinance?}.
Loan Payment Example: The monthly payment per $1,000 borrowed at 5.89% APR for a term of 72 months would require 72 monthly payments of $16.52 based on 30 days to first payment. The monthly payment per $1,000 borrowed at 5.89% APR for a term of 12 months would require 12 monthly payments of $86.02 based on 30 days to first payment.
NOTE: The credit score ranges utilized to define "Excellent", "Good", "Fair" and "Poor" in the "Credit Score" drop down option are established by BestMoney.Com as a guideline. Standards for rating credit scores and associated available rates may vary by lender.
Refinance Loan: Refinancing at a longer repayment term may lower your car payment but may also increase the total interest paid over the life of the loan. Refinancing at a shorter repayment term may increase your car payment but may lower the total interest paid over the life of the loan.