How to Prequalify for an Auto Loan Refinance

Many borrowers choose to refinance their auto loans if they can qualify for lower interest rates. A lower rate could save you hundreds or even thousands in interest costs over time. Another common reason for refinancing a car loan is modifying your term to reduce your monthly payment. The latter could help in the short term if you’re struggling, but it will likely result in higher interest costs over time. 

No matter your reason for refinancing your car loan, prequalifying for new loans could make sense. Here are the benefits of prequalifying for a refinance auto loan, how the process works, and which auto lenders offer this option. 

Why should you prequalify for an auto refinance loan? 

Prequalifying for a refinance auto loan involves providing basic personal and financial information to a lender. In exchange, that lender offers insight into potential loan amounts and rates you might qualify for. 

---

Tip

Prequalification doesn’t result in a loan agreement, so your actual rates and terms could be different after you formally apply, but taking this initial step can be worthwhile.

---

Because rates, fees, loan amounts, and terms vary across lenders, prequalifying can help you shop around for the best possible auto loan refinance. Consider creating a simple database of lenders as you prequalify to track rates and other important loan details. That way, you can compare all the information when it’s time to apply for an auto refinance loan. 

Unlike a formal auto loan application, which often involves a hard credit check, prequalifying for an auto refinance loan only results in a soft credit pull. Both types of inquiries will show up on your credit reports but with one important difference: A hard credit pull can lower your credit score by a few points, and soft credit checks don’t affect your credit at all. So you won’t need to worry about prequalifying for a car loan harming your credit. 

Our expert’s advice on auto loan refinance

Andrew Steger 

CFP®

Refinancing an auto loan can have pros and cons. It can lend itself to reduced monthly payments, freeing up cash flow for other expenses. The downside is that a refinance could lend itself to a longer loan duration and increased interest. I would recommend an auto refinance when a reduced interest rate is available, or you need a reduced monthly payment. It is not uncommon for expenses to arise, and an auto loan refinance could free up cash for other expenses or debts.

How to prequalify for an auto refinance loan

The process of prequalifying for an auto refinance loan is simple. Before you start, it helps to know what information you’ll need. Your lender may ask for the following: 

• Name
• Address (and length of time you’ve lived there)
• Phone
• Email
• Date of birth
• Monthly rent or mortgage amount
• Monthly income
• Origination date of current loan
• Payoff amount for current auto loan
• Vehicle identification number (VIN)
• Current mileage
• Year, make, and model of your car

Once you’ve gathered this information, you can begin the prequalification process. This process can differ by lender, but many let you prequalify for an auto loan refinance online, which is convenient and quick. You may also be able to prequalify for a refinance over the phone or in person. 

Prequalifying for an auto refinance loan can take just a few minutes, barring any unforeseen issues. You share the information your lender requests on the application and review a quote detailing potential rates and loan terms. You can then enter this info into your lender comparison database to reference later as you narrow your options. 

What are the typical requirements to refinance an auto loan?

Each lender has different requirements for refinancing an auto loan, but in general, borrowers, cars, and the loan you refinance may need to meet certain criteria. 

Borrower requirements

Borrower requirements for auto loans can be more flexible than you’d see with a mortgage. For instance, some auto lenders may be willing to accept a low credit score in the 500s or a debt-to-income ratio (DTI) as high as 60%. You typically need good credit and a DTI of 43% or below to qualify for a conventional mortgage loan, but requirements can vary by your lender. 

Vehicle requirements

Your car might also need to meet certain criteria. Lenders often won’t refinance a vehicle with mileage over a certain limit, typically 125,000 to 150,000 miles, or one that’s more than 10 years old. 

Your car’s loan-to-value ratio (LTV) might need to be under 125%—but some lenders may accept a higher LTV. The lower your LTV, the better your chances of qualifying for a refinance loan with a favorable rate and term. A salvage title or a title indicating a serious past incident, such as your car being totaled, could make you ineligible to refinance. 

Current auto loan requirements

Certain auto refinance lenders also have requirements for car loans they’ll refinance. For instance, your outstanding loan balance may need to exceed a certain amount, such as $5,000, or your loan may need to be open for at least six months before you can qualify for a refinance. 

Which auto loan refinance lenders offer prequalification? 

Many auto loan refinance lenders offer the option to prequalify. The process could look different depending on the lender, but you’ll likely want to gather the documentation we mentioned above to help streamline your prequalifications. 

Here are lenders offering auto loan refinances. Note that some offer the option to prequalify and check your rate, but others do not. 

Lender	Offers prequalification?
Ally	✅
Axos	❌
Bank of America	❌
Consumers Credit Union	✅
Digital Federal Credit Union	❌
LendingClub	✅
LightStream	✅
Navy Federal Credit Union	❌
PenFed Credit Union	✅
Upgrade	✅
Upstart	✅

How to choose the best auto loan refinancing deal for you

Once you’ve prequalified with different lenders and come up with a list of potential rates and terms, it’s time to narrow down your options and apply for an auto loan refinance. 

Here’s what to consider as you’re determining the best lenders and loans for your situation. 

• Qualifying criteria: Consider each lender’s qualification criteria for borrowers, vehicles, and current loans. Lenders might disclose this information on their websites or share it over the phone.
• Interest rate: Your interest rate will affect the overall cost of your auto refinance loan. Higher rates will result in higher interest costs over your loan’s term, and lower rates will result in lower costs. 
• Fees: Fees also affect your loan costs. Lenders may charge application fees and prepayment penalties. 
• Loan term: Different lenders may offer unique terms for auto loan refinances, so it’s essential to compare to find a term that best meets your needs. 
• Lender reputation: Consider your prospective lender’s reputation. Research reviews from previous customers, lender history, and past complaints in the Consumer Financial Protection Bureau’s complaint database for insight into lenders’ reputations. 

---

Tip

Pay attention to the annual percentage rate (APR) each lender offers—this is your interest rate plus fees. The APR provides a more complete picture of the total cost of a loan on an annual basis, which can be higher than the interest rate alone.

---

What happens after you prequalify?

After prequalifying, evaluate offers from prospective lenders using the criteria mentioned above. Once you’ve identified the best possible options, you can apply for auto loan refinances with those lenders. This will provide concrete insight into the loan rates and terms you qualify for. You can then choose the best possible option and move forward by accepting your chosen lender’s loan offer.

Applying for an auto loan refinance is a more complex process than prequalifying, and your lender may request the following documentation to verify your identity, income, address, and car details:

• Copy of your driver’s license
• Social Security number
• Pay stubs
• W-2s
• Bank statements
• Proof of insurance
• Purchase agreement for your car
• Loan statements

After you apply, your lender will perform a hard credit pull. In case you’re worried that multiple hard inquiries will harm your credit score, popular credit scoring models allow for a “rate shopping” period, so multiple hard inquiries from auto lenders will only count as one hard inquiry if you apply within a set time frame. 

Rate shopping time frames can vary from 14 to 45 days, depending on which scoring model your lender relies on for its loan decisions. But to be on the safe side, consider applying for auto refinance loans within a two-week span.