Updated
May 02, 2023 Refinancing your car loan can be a great way to save money—if you can qualify for a lower interest rate on a new auto refinance loan. You could also reduce your monthly payment on your current car loan by spreading out your loan repayment over a longer period of time.
To find out if a car refinance loan could help you to save money or lower your loan payments, just input your desired auto loan amount and loan term into our auto refinance calculator.
Frequently Asked Questions
Still not sure if you should refinance after using our auto loan refinance calculator? Here are some common questions that many people have about the car refinancing process.
Most people take out auto loans when they can’t pay for a new car out-of-pocket. Often, your auto loan will have a long repayment term lasting several years. During that time, your financial situation can change.
If you originally got your loan at a dealer or your credit has improved since you bought the car, it’s very likely you’ll be able to qualify for a new loan at a lower interest rate. This could reduce the costs of interest and lower your total repayment expenses.
On the other hand, your finances may have grown tighter over the past few years. If the payments on your current auto loan no longer fit your budget, you may want to spread out your monthly car payments over a longer loan term so you can pay less each month.
In either case, an auto loan refinance is a great idea.
Just be aware that if you’re refinancing due to financial hardship and your goal is to reduce your monthly payments by stretching out your repayment timeline, this approach will cause you to pay more in total interest in the long-run.
While you will save money each month, you will pay interest for a longer period of time, so the total costs of loan repayment are going to be higher. This can sometimes be true even if you refinance to a rate lower than your current interest rate, depending on how much lower your new rate is.
There’s no fixed time period you have to wait before you refinance an auto loan. However, it’s generally a good idea to give yourself about six months to a year to pay down your loan balance and improve your credit score before applying for an auto loan refinance.
Otherwise, you may not see much difference in your auto loan rates compared with your current loan. And, by applying too soon for a refinance loan, you’ll get additional inquiries on your credit report shortly after you got your original loan. This is a problem because too many hard inquiries in a short time can hurt your credit score.
You shouldn’t wait too long to apply for a refinance loan though. Car loan interest is front-loaded onto the first years of your loan, so it is during this time that you pay the bulk of your interest costs. Because of this, refinancing earlier in the life of the loan will typically help you save the most on interest associated with your car loan repayment.
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