How to Refinance a Car Loan

You can refinance a car loan to get lower monthly payments and sometimes decrease the length of your payment plan. In order to take advantage of these benefits, you will need to refinance a car loan early on.

Difficulty:

Easy

Instructions

Things You'll Need

• Vehicle Registration Number
• Car loan worth more than $8,000

1. Prepare to refinance your car loan as soon as possible. Most car loans have you paying off the interest before the principal, so it doesn't work to your benefit to refinance a loan that has been mostly paid off. Also, many companies won't consider refinancing loans that are less than about $8,000.

2. Look up different financial lenders in your area. You cannot refinance your loan with the same group that originally gave you the loan. You need to shop around at different places to find the best refinance rates, just like looking for a regular car loan.

3. Find the exact names that were on your original loan. If you hold a joint loan with your spouse, then the refinanced one must also be in both names. Have your Vehicle Identification Number from your registration.

4. Get an appraisal for the value of your car. Most lenders will not let you refinance for more than the current value of your car. If you car has dropped significantly in value, then it may have jeopardized the benefits of refinancing.

5. Meet with different lenders to get a refinancing quote. You'll want to compare the new interest rates in order to find the best refinancing deal. Remember to ask for an Annual Percentage Rate (APR) to make it easier to compare different quotes.

Tips & Warnings

• If you pay back the same amount monthly on your new loan as you did on the old one, you'll pay off the loan much faster.

• You can usually refinance a car loan if you've had a steady job and paid for bills on time for about 6 months, even if you have bad credit.

• Even refinancing your loan to go down one APR percentage point can save you hundreds and maybe thousands of dollars.

• Be careful not to refinance your car loan with a company that charges fees. You should only have to pay a small amount to the state to change the name of the loan holder.

• Your credit rating is just as important when it comes to refinancing. Maintain timely payments in order to receive a preferable interest rate.