{"id":23805,"date":"2026-04-02T23:18:36","date_gmt":"2026-04-02T23:18:36","guid":{"rendered":"https:\/\/budgetadirect.com\/?p=23805"},"modified":"2026-04-02T23:18:46","modified_gmt":"2026-04-02T23:18:46","slug":"when-should-you-refinance-your-car-loan-and-when-to-wait","status":"publish","type":"post","link":"https:\/\/budgetadirect.com\/?p=23805","title":{"rendered":"When Should You Refinance Your Car Loan? And When To Wait"},"content":{"rendered":"<div>\n<div id=\"block_912c0c9046130e4a6c162f7a80cdae37\" class=\"key-takeaways sm:border-l-4 border-(--accent) sm:pl-8 my-8 relative\" style=\"--accent: var(--color-blue-medium)\">\n    <!-- htmlmin:ignore --><\/p>\n<h2 class=\"heading-4 mt-0 mb-4 text-crop-none max-sm:flex max-sm:items-center max-sm:gap-4\" id=\"key-takeaways\" data-position=\"0\" data-beam-element-viewed=\"\" data-id=\"br-h2-0-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Key takeaways\" data-outcome=\"\">\n    <span class=\"shrink-0\">Key takeaways<\/span><br \/>\n        <span class=\"max-sm:h-0.5 max-sm:w-full max-sm:w-full max-sm:bg-(--accent) max-sm:rounded-full max-sm:block\"\/><br \/>\n    <\/h2>\n<p>    <!-- htmlmin:ignore --><\/p>\n<ul class=\"flex flex-col text-gray-700 mb-0 gap-2 list-disc\">\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            The best time to refinance is when your credit score or overall financial situation has improved.\n                                                <\/li>\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            Generally, you should aim to either lower your interest rate or your monthly payment \u2014 preferably both.\n                                                <\/li>\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            Avoid refinancing when auto loan rates are high or if you won\u2019t be able to save money by switching lenders.\n                                                <\/li>\n<\/ul>\n<\/div>\n<p>It makes sense to consider refinancing your auto loan if you can lower your interest rate and monthly payment. The refinancing process involves swapping your current loan for a new loan with different \u2014 and ideally better \u2014 terms.<\/p>\n<p>However, refinancing is not always a wise financial move. If interest rates are high, or if you\u2019re close to paying off your loan, then it may make more sense to stick with your current lender. Knowing the ins and outs of when to refinance and when to wait will help you make the best decision for refinancing your auto loan.<\/p>\n<h2 id=\"when\" data-position=\"1\" data-beam-element-viewed=\"\" data-id=\"br-h2-1-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"When should you refinance your car loan?\" data-outcome=\"\">When should you refinance your car loan?<\/h2>\n<p>There are multiple benefits to refinancing and quite a few situations where refinancing makes the most sense. In general, the best time to refinance your auto loan is when you can reduce the interest rate, but even just lowering your monthly payment can add much-needed room to your budget.<\/p>\n<h3>When you can get a lower rate<\/h3>\n<p>Refinancing is a good move when rates are low. Auto loan refinancing rates tend to match used vehicle rates, which currently average 11.26%, according to Experian data. However, Bankrate\u2019s data shows that the auto loan rates for a 48-month used car loan haven\u2019t changed significantly in months. If you borrowed your loan when rates were high, like in 2022, you could benefit from an auto loan refinance \u2014 in fact, Experian reports that borrowers who refinanced their car loans in the third quarter of 2025 saved an average of 2.08 percentage points on their rate.<\/p>\n<p>Assuming a remaining loan balance of $10,000 and a term of four years, this is how refinancing from a 15% APR to a 7% APR can affect your overall costs:<\/p>\n<div class=\"w-full overflow-x-auto\">\n<table class=\"wp-block-table has-fixed-layout wrapped\">\n<thead>\n<tr>\n<th><strong>Loan amount<\/strong><\/th>\n<th><strong>APR<\/strong><\/th>\n<th><strong>Remaining term<\/strong><\/th>\n<th><strong>Monthly payment<\/strong><\/th>\n<th><strong>Total interest paid<\/strong><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>$10,000<\/td>\n<td>15%<\/td>\n<td>4 years<\/td>\n<td>$278<\/td>\n<td>$3,359<\/td>\n<\/tr>\n<tr>\n<td>$10,000<\/td>\n<td>7%<\/td>\n<td>4 years<\/td>\n<td>$239<\/td>\n<td>$1,494<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Your total savings would be about $39 a month \u2014 but you would reduce the total interest you pay by $1,865.<\/p>\n<h3>When your credit score and DTI have improved<\/h3>\n<p>Improving your credit score may be enough to get a lower rate. The difference between applying for a loan with good credit and applying with bad credit is significant. For many auto loans, it can mean an APR that is more than 10 percentage points lower. That could mean major savings on your monthly payment and total interest costs.<\/p>\n<p>Even if market rates haven\u2019t changed much since you first borrowed, refinancing with a better credit score can lead to savings on your auto loan.<\/p>\n<h3>When you received your initial loan from the dealer<\/h3>\n<p>Dealer financing takes many forms. Often, it is either captive financing, which is offered through a sister company to the auto manufacturer, or a third-party financing company that works with dealerships. Because dealers tend to offer loans at a markup to make a profit, you may have a much higher rate than you would if you\u2019d shopped at a bank or credit union. Refinancing with a different lender could help you secure a lower, more competitive rate.<\/p>\n<h3>When you\u2019re struggling to keep up with payments<\/h3>\n<p>If your income has dropped or your expenses have increased since you took out your auto loan, it may be time to explore refinancing. You may be able to get a more affordable car payment by extending your loan term \u2014 even without a lower interest rate. Many lenders offer terms as long as 84 months, which could save you money in your monthly budget.<\/p>\n<p>One warning: You\u2019ll typically pay more total interest if you extend your term. Refinancing to a longer term can be a good short-term solution, but consider making principal-only payments to reduce your overall cost.<\/p>\n<h3>When you have positive equity in your car<\/h3>\n<p>Lenders view positive equity as a big plus when refinancing. The bigger the difference between what you owe and your car\u2019s worth, the more the lender stands to make if you default on your loan. Since the lender takes less risk, you may get a lower interest rate.<\/p>\n<p>You can estimate your car\u2019s value on websites like Edmunds or Kelley Blue Book. Once you have an estimate, divide the number by your outstanding balance to determine if you have positive equity.<\/p>\n<p>For example, if your car\u2019s value is $20,000 and your remaining balance is $15,000, your loan-to-value ratio is 75%. That means you have 25% equity in your car.<\/p>\n<section class=\"editorial-insight-box --insight-box +mg-vertical-md\" data-template=\"insight_box\">\n<div class=\"card-body border-l-4 border-blue-800\">\n<div class=\"content-wrapper\">\n<p>\n                    Refinancing more than once is possible\n                <\/p>\n<div class=\"content wysiwyg wysiwyg--flush\">\n<p>You can refinance your car loan multiple times, but it may be difficult if you have a low balance or don\u2019t have much time left on your loan.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n<h2 id=\"avoid\" data-position=\"2\" data-beam-element-viewed=\"\" data-id=\"br-h2-2-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"When should you avoid refinancing your car\" data-outcome=\"\">When should you avoid refinancing your car<\/h2>\n<p>Refinancing a car loan isn\u2019t always the right choice, especially if it won\u2019t improve your financial situation \u2014 or may even worsen it. In this case, refinancing and paying off your car loan early may not be the best decision.<\/p>\n<h3>When you\u2019re close to paying off your loan<\/h3>\n<p>If you are nearing the end of your loan term, refinancing may not save you money. Instead, you should stick with it unless you desperately need to extend your loan term to reduce your monthly payment.<\/p>\n<p>In addition, most lenders have a minimum loan term of 24 or 36 months. If you have less than that remaining on your car loan, you may have to extend your term. While a longer loan term will mean a lower monthly payment, you will also pay more interest.<\/p>\n<p>Your remaining loan balance also matters. Lenders set a minimum balance for refinancing, typically between $3,000 and $7,500. If you owe less than the lender\u2019s minimum balance, it is unlikely that you will qualify. And while cash-out refinancing exists, it can be hard to find a lender that offers it.<\/p>\n<h3>When your auto loan is new \u2014 or old<\/h3>\n<p>Most lenders require you to have your current auto loan for at least six months before you can be approved for refinancing. A solid payment history shows potential lenders that you are a low lending risk.<\/p>\n<p>Similarly, most lenders require that you have at least a year left on your loan. This typically gives a lender enough time to earn interest on your loan. It also prevents you from over-borrowing. Lenders rarely offer terms of less than two years, and opting to refinance when you only have a few months left on your current loan will lead to paying more than necessary in interest.<\/p>\n<h3>When you owe more than the car is worth<\/h3>\n<p>Because cars depreciate over time, the longer you have an auto loan, the more likely you are to owe more on the car than it is worth. This is also called being underwater or upside down on a car loan \u2014 and it will make it hard to refinance. Lenders know they won\u2019t be able to recoup the loan\u2019s full amount if you default while upside-down, so they generally won\u2019t extend any new credit secured by the car.<\/p>\n<p>This is the opposite of having positive equity in your car. So while you may be able to refinance, you should determine if it will actually save you money. If it won\u2019t \u2014 or you just break even \u2014 refinancing may not be your best option.<\/p>\n<section class=\"editorial-insight-box --insight-box +mg-vertical-md\" data-template=\"insight_box\">\n<div class=\"card-body border-l-4 border-blue-800\">\n<div class=\"content-wrapper\">\n<p>\n                    Budget carefully before refinancing\n                <\/p>\n<div class=\"content wysiwyg wysiwyg--flush\">\n<p>Don\u2019t refinance a vehicle you can\u2019t afford. Reassess your budget to see if you can make any cuts, or consider trading in the car for a cheaper vehicle with a lower payment.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n<h3>When interest rates are rising<\/h3>\n<p>If you\u2019re struggling to make payments because of the short repayment term you chose, a car refinance may still make sense. If you have to choose between missing a payment and extending your loan term at a higher rate, choosing the longer-term refinance could save your credit score and prevent a future car repossession.<\/p>\n<h3>When you don\u2019t meet the lender\u2019s requirements<\/h3>\n<p>Lenders determine eligibility based on similar criteria, but each has its own standards. Before you start, check the auto loan refinancing requirements for you, your vehicle and your current loan.<\/p>\n<ul class=\"wp-block-list\">\n<li>A regular source of income, a low debt-to-income ratio and good credit.<\/li>\n<li>Proof of residence, such as a lease agreement, mortgage statement or utility bill.<\/li>\n<li>Your car\u2019s make, model, year, vehicle identification number (VIN) and mileage to evaluate your car\u2019s worth.<\/li>\n<li>Your loan\u2019s current balance, monthly payment and payoff amount to determine if you meet its minimum loan requirements.<\/li>\n<\/ul>\n<p>Most lenders will not consider refinancing unless your car is less than 10 years old. Your mileage should also not exceed 100,000 or 150,000 miles, depending on the lender.<\/p>\n<h3>When fees outweigh your savings<\/h3>\n<p>Before refinancing, consider whether fees will impact your overall savings. If your auto loan has a prepayment penalty, paying off your loan early can cost you. You will need to weigh the amount you save in interest over the cost of the prepayment penalty to determine if refinancing will actually save money.<\/p>\n<p>Watch out for other fees charged by both your old and new lender. Transaction fees, administrative fees or processing costs may reduce the benefit of refinancing. You may be able to negotiate these fees, but there are also some states that will charge you state registration and title transfer fees for re-registering your car after refinancing.<\/p>\n<h2 id=\"time\" data-position=\"3\" data-beam-element-viewed=\"\" data-id=\"br-h2-3-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Is now a good time to refinance your car?\" data-outcome=\"\">Is now a good time to refinance your car?<\/h2>\n<p>Current auto loan refinance rates are high, but if you purchased a car before the Fed\u2019s rate cuts, then you might find a more favorable rate now. Tariffs are another factor that could affect refinancing. <\/p>\n<p>Your best bet is to keep track of auto loan refinance rates on a regular basis and take extra steps to boost your credit, like keeping your credit card balances low or paying them off, so you\u2019re ready when rates drop. Your financial situation should determine when you\u2019re ready to refinance \u2014 ideally, it should be after you have improved your credit and while average rates are on the decline.<\/p>\n<h2 id=\"alternatives\" data-position=\"4\" data-beam-element-viewed=\"\" data-id=\"br-h2-4-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Alternatives to refinancing\" data-outcome=\"\">Alternatives to refinancing<\/h2>\n<p>If you want to lower your car payment without refinancing, you still have options.<\/p>\n<ul class=\"wp-block-list\">\n<li>\n<strong>Request loan <\/strong><strong>modification.<\/strong> If you\u2019re behind on payment, ask your lender about a car loan modification. You may be able to extend your term or reduce your rate when facing short-term financial problems.<\/li>\n<li>\n<strong>Swap to a less expensive vehicle.<\/strong> This can be done either by trading in your car for a less expensive model or selling your car privately and buying a less expensive vehicle.<\/li>\n<li>\n<strong>Consider a lease.<\/strong> Switching over to a car lease could also help you save on monthly payments, but it may cost more over the long term. <\/li>\n<li>\n<strong>Pay your loan off with a personal loan.<\/strong> If your car is too old for refinancing, consider a personal loan. Since these loans are often unsecured, they don\u2019t require any vetting by the lender, and many lenders are able to approve loans within a day of applying.<\/li>\n<\/ul>\n<h2 data-position=\"5\" data-beam-element-viewed=\"\" data-id=\"br-h2-5-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Bottom line\" data-outcome=\"\">Bottom line<\/h2>\n<p>The primary reason to consider refinancing is to lower your rate or monthly payment. Try to apply the savings to your balance for an even faster pay off.<\/p>\n<p>Get the refinancing process started by checking your credit score and prequalifying with at least three lenders to see what interest rates you qualify for without hurting your credit score. Crunch the numbers to be sure refinancing is aligned with your overall financial goals.<\/p>\n<div class=\"HelpfulCTA mx-auto flex flex-col items-center gap-6 my-6 py-12 text-base border-y border-gray-200\" data-helpful-cta=\"\" data-beam-element-viewed=\"\" id=\"did-you-find-this-helpful\" data-type=\"cta\" data-location=\"article-bottom\" data-position=\"banner\" data-text=\"Did you find this page helpful?\">\n<div class=\"HelpfulCTA-initial w-full flex flex-col items-center gap-4\" data-cta-initial=\"\">\n<div class=\"HelpfulCTA-question text-lg font-bold text-center text-gray-900\">\n            Did you find this page helpful?<\/p>\n<div id=\"BEdmGlJoSy\" class=\"hidden\">\n<div class=\"wysiwyg wysiwyg--sm wysiwyg--flush max-w-xs\">\n<p class=\"mb-6 text-base\">\n                            <strong class=\"block font-bold text-gray-900\">Why we ask for feedback<\/strong><br \/>\n                            Your feedback helps us improve our content and services. 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0-.323.322c-.075.15-.075.603-.075 1.226v7.68c0 .623 0 1.075.075 1.226.075.14.183.247.323.322.15.075.603.075 1.228.075h.16c.625 0 1.078 0 1.228-.075a.778.778 0 0 0 .324-.322c.075-.151.075-.603.075-1.227V5.423c0-.623 0-1.076-.075-1.226a.722.722 0 0 0-.324-.322c-.15-.076-.603-.076-1.227-.076h-.161Z\" class=\"icon-base\"\/><\/svg><\/span> <span class=\"text-base leading-4\">No<\/span><br \/>\n            <\/button>\n        <\/div>\n<\/p><\/div>\n<p>    <!-- Yes Form --><\/p>\n<p>    <!-- No Form --><\/p>\n<div class=\"HelpfulCTA-thankyou flex flex-col items-center gap-2\" data-cta-thankyou=\"\" style=\"display:none;\">\n<p>Thank you for your<br \/>\n            feedback!<\/p>\n<p>Your input helps us improve our<br \/>\n            content and services.<\/p>\n<\/p><\/div>\n<\/div><\/div>\n<p>Read the full article <a href=\"https:\/\/www.bankrate.com\/loans\/auto-loans\/when-to-refinance-car-loan\/\" target=\"_blank\" rel=\"noopener\" rel=\"nofollow\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key takeaways The best time to refinance is when your credit score or overall financial situation has improved. Generally, you should aim to either lower your interest rate or your monthly payment \u2014 preferably both. Avoid refinancing when auto loan rates are high or if you won\u2019t be able to save money by switching lenders.<\/p>\n","protected":false},"author":1,"featured_media":23806,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[58],"tags":[],"class_list":{"0":"post-23805","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-homes"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>When Should You Refinance Your Car Loan? And When To Wait | BudgetADirect<\/title>\n<meta name=\"description\" content=\"Key takeaways The best time to refinance is when your credit score or overall financial situation has improved. 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