How to refinance a car loan

Thinking about refinancing a car loan? Our attractive rates and speedy application process can help make that happen.

5 Tips for Refinancing a Car Loan


There are many reasons you might want to refinance your car loan. Maybe your credit score has improved and you think you’ll qualify for a lower interest rate. Or your financial situation has changed and you want to make changes to the original loan, like removing a co-signer.

When you refinance an auto loan, you take out a new loan and pay off the balance on your current car loan. In general, refinancing only makes sense if you can get a better rate and terms than your current loan.

Keep reading or click on a topic below to learn more about refinancing an auto loan:


Depending on your financial situation, refinancing your car loan could be a smart move. But it’s not for everybody.

Before you start the refinancing process, ask yourself these questions:


Does my auto loan have prepayment penalties?

If the answer to this question is “yes,” refinancing might not be worth it. Prepayment penalties mean you’ll pay a fee for paying off the loan early. This fee might eliminate the financial benefits of paying off your auto loan early.

SF Fire Credit Union auto loans have no prepayment penalties. Check out our current rates to see if we can save you money by refinancing.


Will I have to pay any fees?

You might have to pay fees to reregister the vehicle and transfer the title after refinancing. These fees vary from state to state, so be sure to find out what your state charges before you refinance.


Is my loan balance higher than the value of my car?

If your current loan balance is higher than your car’s market value, refinancing might not make sense. It could be harder for you to get approved for a new loan or you might not see a big difference in the new loan terms.


How old is my car?

Some lenders have restrictions when it comes to the age and mileage of a car. For example, a car over eight years old or with more than 100,000 miles may be hard to refinance.


Has my credit improved?

If your credit score has gone up since you took out your auto loan, you might be able to refinance and get a lower interest rate, which can save you money over the life of the loan.

If your credit hasn’t improved, getting a lower rate might be harder. Don’t worry, though. There are many ways you can start to rebuild your credit. Check out these helpful articles to find out how.

If you’re not sure about your credit score, check your credit report to find out. Checking your credit report will also help you identify any errors that may be negatively affecting your score.

SF Fire Credit Union members can check their FICO score for free each quarter in Online & Mobile Banking.


What documents will you need to refinance?

If you’ve decided that refinancing an auto loan is a good financial move, you’ll want to make sure you have the documents and information you need to start the process.

These include:

  • Personal information, such as your Social Security number, previous addresses, and how much you pay each month for your mortgage or rent.
  • Proof of income. A paycheck stub or recent tax return may be all you need. You might also be asked for your employment history.
  • Proof of insurance. Your lender will want to make sure you have a current auto insurance policy.
  • Information on your current loan. You’ll need to know the payoff amount for your current loan, the interest rate, and length of the loan.
  • Information about the car. You’ll want to provide the make, model, mileage, and year of the car. You’ll also need to know the vehicle identification number (VIN), which can usually be found in the lower corner of the windshield on the driver’s side.


Getting prequalified for a car loan refinance

Getting prequalified can help you save some time when you’re shopping around for auto loan refinance options.

When you apply for prequalification, your lender will look at information like your credit score and the type of vehicle you’re looking to refinance.

Remember, prequalification is more of a guideline on what types of loans you might qualify for, not a guarantee of approval.


How to apply for a car loan refinance

Once you’ve decided to refinance and found the right lender and loan, you’re ready to start the application process.

You’ll have to complete a loan application. Bring all the documents mentioned in this article, since you’ll likely have to provide that information.

Keep in mind, this application will count as a hard inquiry on your credit and could lower your score by a few points.

If your loan is approved, your lender will send you a document with all the terms and conditions of your new loan. Keep a copy for your records, since it will include details about payment dates, minimum amounts, and your options for making payments on the loan.


Paying off your old loan

Most lenders will take care of paying off your old loan with your new one. Make sure you reach out to your previous lender to confirm that your old loan has indeed been paid off.

Once your original loan is paid off, focus on making on-time payments to your new loan each month, which can help increase your credit score.


The bottom line

Refinancing an auto loan could give you better rates and terms on your loan, saving you money in the long run.

Before you refinance, ask yourself some questions about your financial situation to make sure it’s the right decision for you.

Still have questions about buying a car? Check out our other helpful articles in the Buying a Car section of our Learning Center.

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