What Are the Requirements to Refinance an Auto Loan?

Each lender will set its own requirements for refinancing an auto loan. The guidelines for refinancing will in part depend on the reason you are seeking to restructure your loan.

Purpose

There are two key reasons to refinance: first, to save money on the loan; second, to prevent default. If you are strictly looking to save money, you will face one set of requirements in order to accomplish this goal. If you are facing default and need to refinance in order to keep your loan, you will face a separate set of requirements to accomplish your very different goal.

Credit Requirements

To save money on your auto loan, you will need to show you have improved your credit since taking the loan. This may qualify you for a lower interest rate or better financing terms. It is also possible the credit market itself has improved, which can be an additional incentive to save money through refinancing.

Income Requirements

If you are looking to prevent default, you are likely in a compromised financial position where your credit or income may have dropped. In this case, you will need to show the lender you can continue to make payments only if your monthly payments are reduced. You will need to verify that your lower income will cover the loan cost if the loan payment can be reduced.

References

• United Service Automobile Association: Refinance