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Requirements to refinance your car loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering you interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct research and compare information for free – so that you can make sound financial decisions. Bankrate has partnerships with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website come from companies that pay us. This compensation can affect the way and when products appear on the site, such as for instance, the sequence in which they be listed within the categories of listing, except where prohibited by law. This applies to our mortgage home equity, mortgage and other home lending products. But this compensation does not influence the information we publish, or the reviews that appear on this website. We do not include the universe of companies or financial offers that may be accessible to you. MoMo Productions/Getty Images

5 min read Published November 16, 2022

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Written by Bankrate Bankrate. This article was written using automation technology and thoroughly verified and edited by an editor on our editorial team. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to take control of their finances. They provide concise, well-researched and easily understood information that breaks down complex topics into manageable bites. Written by Mark Kantrowtiz and reviewed by Nationally recognized expert on student financial aid Mark Kantrowitz is an expert on student financial aid including the FAFSA and 529 plans, scholarships benefits for education and tax credits as well as student loans. The Bankrate promises

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They ensure that what we write is objective, accurate and reliable. Our loans reporter and editor focus on the things that consumers care about the most — various kinds of loans available as well as the best rates, the most reliable lenders, how to repay debt, and more — so you’ll be able to feel secure when investing your money. Integrity of the editing

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There are money-related questions. Bankrate has the answers. Our experts have been helping you manage your money for over four decades. We continually strive to provide our readers with the professional advice and tools required to succeed throughout life’s financial journey. Bankrate adheres to strict standards , so you can trust that our information is trustworthy and reliable. Our award-winning editors and reporters produce honest and reliable information to assist you in making the best financial decisions. Our content produced by our editorial team is objective, truthful, and not influenced through our sponsors. We’re honest about the ways we’re capable of bringing high-quality information, competitive rates and useful tools for our customers by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products andservices or by you clicking on specific links on our website. So, this compensation can influence the manner, place and when products are displayed within the categories of listing in the event that they are not permitted by law for our mortgage, home equity and other products for home loans. Other factors, like our own website rules and whether the product is available within the area you reside in or is within your own personal credit score can also impact the manner in which products are featured on this site. Although we try to offer the most diverse selection of products, Bankrate does not include details about every financial or credit item or product. If you’re considering refinancing your vehicle loan typically depends on the savings you’ll make — either monthly or over the course of. However, before you can sign a new loan you should ensure that your vehicle and you meet the criteria. While requirements vary between lenders, keep in mind the ones below. What are the requirements to take out a loan in order to finance your car Consider these aspects when considering an auto loan. The remaining time on the loan The length of time remaining to your loan is a typical requirements for eligibility. In general, lenders want you to be current with your loan payments, have completed at minimum six month into the loan and have at least six months left. This lets the lender to see that you have a track record of paying your loan — or that you are able to earn a profit on interest when you finish paying off. If you took out a 60-month auto loan and are three months from making payments it is likely that you won’t be able to refinance it for another couple of months. In the same way, if you’ve paid 54 times already it is likely that you’ll need to finish paying it off rather than refinance it. Amount left Minimum loan amounts differ by lender and lender, but you can expect to need at least around $3,000 to $5,000 remaining on your loan. Since refinancing is essentially the process of taking out a new loan , lenders don’t want to offer small amounts because they will not be able to make as much money from these. If you purchased an expensive vehicle, you may be unable to refinance your loan immediately. Refinancing autos with loans for over $50,000 can be difficult. Model year and mileage If you bought a heavily used car and want to refinance the loan — or recently accumulated a significant amount of miles, you may not be eligible to. The majority of lenders limit their loans to 100,000-150,000 miles. Although lenders do not set a minimum age but you might not qualify if you have an older car. Most lenders have the minimum age at 10-years-old. Some lenders will require a car under eight years old to consolidate the loan. Credit score Like any loan you will be a major aspect. Refinancing can be a great idea if you have low interest rates on your car loan and have since raised your credit score. Anything below 600 will not bring you a lower rate, and it might , especially in the event that you lengthen the loan term to reduce monthly payments. It’s free to apply online. If your debt isn’t where you would like it to be, take a look at reworking it before making an application for refinancing. Requirements for debt-to income ratios Your debt-to-income ratio measures your debt against your income. It is usually expressed in terms of a percentage. The acceptable range is different depending on lender to lender but is typically less than 50 percent. The process of paying down outstanding debts is the best way to lower your DTI if you find that a lender deems it excessive. Reducing other installment loans or credit card charges could help show that you are financially responsible to a potential lender. Consider using a to find your DTI. So, you’ll be aware of the amount of debt you’ll have to pay off before submitting an application. Refinancing an existing car loan Refinancing a car loan is a simple process. It is the same process as applying for a new car loan. These steps will help you streamline the process: Search for a loan. Make an application with at least three lenders, as you would do for an auto loan. Apply to the loan. Complete all required information — about your identity, work, current loan and car — and submit the required documents. Receive your loan funds. The lender will send you the money or pay your current lender directly. This can take between a couple of days and several weeks, so keep paying your loan. Start paying off your new loan. After your loan is fully funded then it’s time to pay off the loan. Pay your bills on time and then send them to the right lender. Find out the best way to use your savings. After you’ve paid off the new loan and have repaid it, you can utilize the savings to improve your finances. Consider putting money toward a loan, debt repayment or . The pros and cons of refinancing your auto loan Before you refinance consider the . Pros You may secure a lower interest rate. A lender refinancing your loan might provide you with a lower rate interest rate, which will save you money over the course of your loan’s life. A lower interest rate is more likely when your credit score is improving or you have financed your loan through a dealer. Your monthly payment could be decreased. Extending your term or lowering your interest rate can lower your monthly payments. Be aware, however. The extension of the auto loan time frame will also result in additional interest. Cons Your interest rate could rise. If you’re not qualified for a lower interest rate take into consideration improving your credit score prior to applying. You can extend the term of your loan — and the amount of interest you pay. Even if your interest rate will be lower than the one you currently have, you can nevertheless increase the amount of interest you pay if you choose to extend your loan time. The longer it takes you to pay off your car in full, the more interest you’ll accrue. You could get upside-down with your loan. In the event that you decide to extend your loan time frame when refinancing the amount you owe may exceed the vehicle’s value as a result of depreciation. This is referred to as being upside-down on your loan and can make it challenging for you to sell or refinance your vehicle without taking the loss. What to consider when refinancing your auto loan There are some important things to think about prior to deciding whether or not to refinance your auto loan. Are your current interest rates affordable? If you’re already paying a fair interest rate, then you’ll want to compare current rates to make sure a new loan is worth it. In the last few months, the Federal Reserve increased the multiple meetings in a row which could result in auto loan rates will increase over the next year. Bankrate tip

It is important to compare rates from different lenders to determine which one offers the best deal. Use a to compare your monthly payments and total interest with the current loan.

What is the value of your vehicle worth? Before refinancing your car loan, you should know the ratio of your loan to value. The ratio is a measure of the amount you owe. If you’re close to owing more on your vehicle than its value, you may want to refinance for the shorter duration. What are the conditions for the loan? You should know some of the essential specifics of your current loan when looking into refinancing. This includes the loan APR, the length of loan, duration, time left, and the monthly payment. You can also look at your loan documents for details about late charges and . Next steps Refinancing your car loan is a smart choice, however, it is important to follow a few steps to be prepared to go through the procedure. Take into consideration your credit score, your car’s age and mileage, the amount you owe on your vehicle and your ability to afford the new loan. Based on your financial circumstances, consider instead asking about ways to make your car loan payment more affordable. Learn more

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Written by The article was generated using automation technology and thoroughly edited and fact-checked by an editor from our editorial team. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain confidence to control their finances with clear, well-researched details that cut otherwise complicated subjects into bite-sized pieces.

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Reviewed by Mark K. Kantrowitz Reviewed by Nationally recognized student financial aid expert Mark Kantrowitz is an expert on student financial aid including the FAFSA as well as scholarships, 529 plans as well as tax benefits for education along with student loans.

Nationally acknowledged expert in student financial aid

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