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Updated: March 19, 2020 10:13 AM ET | Originally published: March 13, 2020
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Taking out an auto loan can be a necessary evil, but what’s not always necessary is paying more than you have to. Over time, your financial circumstances might change and you may qualify for a better interest rate or a different loan term. For example, if your income suddenly drops, you may need to extend your loan term to reduce your monthly payments. Similarly, if you just paid off a substantial amount of debt, you may qualify for a lower annual percentage rate (APR) than the one you have.

Getting a cheaper rate by refinancing your existing auto loan can be a game-changer. Let’s say that last year you took out a five-year, $25,000 auto loan for a new Honda CRV at a rate of 8% APR. Maybe you made some smart credit moves over the last year, and now you’ve got $20,400 left on your loan. If you refinance for a four-year loan at an interest rate of 3.5% APR, your monthly payment would be $51 less and you’d save $1,939 in interest over the life of your loan, all while keeping your original payoff date on schedule.

Refinancing your auto loan can be a time-consuming process, but it’s definitely worth it if refinancing can save you a lot of money over the course of your loan.

Important Things to Know About Auto Refinancing

  • Refinancing for a longer loan term can decrease your monthly payments, but you may pay more in interest over the life of the loan
  • Interest rates for long-term loans are often higher than for short-term loans
  • Average auto loan interest rates have been slowly rising over the past few years
  • Cash-out refinancing gives you cashback for taking out a larger loan than you need but can be a risky option because you may end up owing more than your car is worth
  • To avoid any issues, keep paying your old auto loan until you get confirmation from your old lender that the loan has been refinanced

Best Auto Refinance Company Reviews

There are many options available in the auto loan refinance market. Although this can make it easier to find competitive rates, it can also be overwhelming. Using a loan comparison website can simplify this process by allowing you to compare multiple offers and lenders.

There are a handful of companies let you compare quotes from some of the best lenders in the nation, just by filling out a single form, to help you choose the right one for your financial circumstances and needs.

LendingTree Review

LendingTree was one of the first websites that allowed people to compare loan rates. It has outlasted most of its peers and become the nation’s largest online loan marketplace, offering a place to compare rates for just about any financial product, including auto refinance loans.

Something that makes LendingTree stand out from other companies that offer similar services is that it has its own customer care department you can reach by phone or by email. You’ll ultimately be working directly with a lender to refinance your car, of course, but if you run into any snags while shopping around, LendingTree will help you out.

LendingTree’s approach to finding the best auto refinance loan is simple. Like most online marketplaces, you’ll fill out a short form in order to get connected with potential lenders. After filling out the form, you can get rate quotes from up to five potential lenders.

rateGenius Review

rateGenius is another well-established rate comparison site that specializes in auto loan refinance. rateGenius generally helps you refinance your auto loan for the same term length so that you don’t pay more over the life of your loan.

rateGenius also does more than just show you offers and pass your name off to potential lenders. This company actually serves as an intermediary between you and the lender, at least to get started. After you enter your information on the website, they’ll shop for quotes from their network of over 150 auto loan refinance companies. If you can get a better rate with one, you’ll work directly with rateGenius’ lending specialists to complete your application. rateGenius will even handle all of the back-end work, such as making sure your old loan gets paid off on schedule and your new auto loan is set up correctly.

Autopay Review

Autopay’s greatest strength is that it offers plenty of options for refinancing. You can use Autopay for a classic auto refinance loan, of course, but you also have two other options that aren’t found with many auto loan refinance marketplaces: cash-out refinancing and lease buyouts. Autopay’s cash-out auto refinance loans can help you if you need access to cash at a low rate. Its lease payoff financing can help you get out of an expensive lease and move into the realm of car ownership.

MyAutoLoan.com Review

MyAutoLoan.com is a small company that can connect you with other car loan products, including loans for new or used cars, lease buyouts, and motorcycle loans.

If you submit your information through MyAutoLoan.com’s online form, you could be connected with up to four loan offers customized just for you, with rates starting as low as 2.99% APR.

Since the company works with many lenders, there aren’t any set qualifications to refinance your auto loan. However, most lenders on the platform prefer you to have at least a 525 credit score and an income of $1,800 per month.

Additionally, you’ll need to borrow at least $8,000 and your car must be less than 10 years old and have less than 125,000 miles to qualify for refinancing. Finally, MyAutoLoan.com doesn’t service consumers in Alaska or Hawaii.

Auto Credit Express Review

Refinancing an auto loan can mean big savings if you’ve improved your credit score since you bought your car. But you’re not out of luck if your credit score hasn’t increased or has even gone downhill. There are auto loan marketplaces like Auto Credit Express that specialize in helping people with poor or even no credit, refinance their loans.

Refinancing your auto loan is harder if you have bad credit, but as long as you’ve demonstrated at least 18-36 months’ worth of on-time payments on your current loan, Auto Credit Express may be able to match you with a potential lender.

The company maintains an active presence on review websites and appears to respond to most reviews, good or bad.

How to Find a Good Auto Refinance Company

There are many great companies out there offering affordable auto refinance loans with top-notch service. However, there are also a fair amount of bad actors looking to take advantage of people in a rocky financial situation. This isn’t limited to exorbitant interest rates or hidden fees, though.

When shopping for a loan, you should always research the lenders themselves. To begin with, it’s a good idea to look at the financial stability of a lender as indicated by a credit rating agency like Moody’s. Next check consumer complaints to either the Consumer Financial Protection Bureau or the Federal Trade Commission. Remember that there’s a big difference between “this company had rude customer service,” and “this company was sued for $20 million last year in a class-action suit.”

Legitimate companies will be transparent about their operations, partners, and underwriters. If such information is incomplete or outright missing, it’s best to move on to another company.

Look out for companies that require you to pay upfront for their services, or that want to sell your data to other entities. These lenders are trying to make money off of you other than through the usual servicing of a loan.

Finally, if something feels off with a company, or if the terms of the loan seem too good to be true, trust your gut and walk away.

How to Refinance Your Auto Loan for the Best Rate

Refinancing your auto loan can potentially save you thousands of dollars, but in order to earn that cash, you’ll need to put in some work up-front. Here’s how you can do it.

Step One: Get Your Information Ready

You’ll need some information and documents to complete your loan application. Gathering these things now can save you sometime later on. Some of the documents you’ll need include:

  • Proof of residence (utility bills, driver’s license, etc.)
  • Proof of insurance (statement, ID card, etc.)
  • Proof of employment and income (tax returns, pay stubs, bank statements, etc.)
  • Your car’s information (year, make, model, mileage, etc.)
  • Your current loan information (lender’s name and contact information, the amount remaining on loan, current interest rate, etc.)

Step Two: Shop for Auto Refinance Rates

The next step is to compare rates. Most potential lenders will only run a soft credit check to give you a rate quote, which won’t affect your credit score. When you go to apply with a lender, however, they will perform a hard credit check, which can drop your score by a few points temporarily. However, credit scoring models treat all hard credit checks within a 14-day period as a single credit check. This means that if you apply with multiple lenders within that time frame, your score won’t drop by much.

Step Three: Choose a Loan

Picking the right loan might seem as simple as choosing the lowest interest rate or the lowest monthly payment, but it’s not that straightforward. Calculating the full impact of a loan on your wallet requires a few more steps.

The best method is to use an auto loan refinance calculator to see how much the new auto loan will save you each month, as well as over the entire life of the loan. Many lenders have their own auto refinance calculators on their websites, but if you can’t find one, you can use this one instead.

Make sure to think about how this will impact your finances going forward. That means making sure you can afford your monthly loan repayments and have a clear idea of how much you’ll pay in interest over the life of the loan.

Should you refinance your auto loan for a longer-term length?

It can be tempting to extend your loan term to decrease your monthly payments. Keep in mind, however, that longer terms mean you’ll pay more in interest over the life of the loan.

Let’s say you took out a four-year, $20,000 loan for a new Honda Civic. If you have an APR of 5%, your monthly payments will be $461 per month. But then you decide to refinance after paying your loan for one year and refinance the remaining $14,971 for another 60 months with a 5.5% APR. In that case, your monthly payments will be $175 less, but you’ll be paying $562 more in overall interest and you’ll be in debt for two more years.

Should you do a cash-out refinance?

You might have the option of taking out a larger loan than you need to pay off your current loan when you refinance. This option is known as a “cash-out refinance” because you’ll get a check for the difference. Since auto loans are generally cheaper than other loans, like credit cards or even personal loans, many people opt for this route if they need cash for a home remodel, vacation or medical emergency.

This can work in many situations, but you’ll need to be aware of the downsides. Doing a cash-out refinance means that you could find yourself “upside-down” on your auto loan, owing more on your car than it’s worth. If you sell your car while you’re still paying it off and get less money than what you currently owe, you’ll have to come up with the funds to cover the remaining balance. Additionally, if you get behind on your payments because you took out a larger amount, your lender can repossess your car.

Step Four: Sign the Documents

So you’ve chosen a new loan. Great! All you have to do is complete the application. This is where you’ll start working more closely with your new lender to complete the process. They may require extra documents or information, so it’s important to stay in close communication with them.

Once the application has gone through and you’ve signed the final documents, your new lender will pay off your old loan. It’s important to keep making your monthly payments on your old loan until you get confirmation that the loan has been paid off. It might take a few days for this to happen. If your regular loan payment is due, the last thing you want to do is miss a payment and lower your credit score over something trivial like this.

After you’ve confirmed that you don’t need to make any more payments with your old lender, you’ll start making payments to your new lender until you pay off your new loan. In the meantime, start thinking about what you’ll do with all the money you’ll save on your new, lower monthly loan payments.

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