How Often Can You Refinance Your Car?

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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You’re unsatisfied with your current auto loan and are thinking about refinancing with a different bank or credit union. But you’re worried you won’t get approved because you’ve already refinanced more than once. Are you completely out of luck? 

Not necessarily. However, getting a new loan may not be a smart financial move, depending on your financial situation. Here’s what you need to know.

Refinance Your Auto Loan

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What Does Auto Refinancing Mean?

First, auto refinancing entails swapping your current loan with a new one with different terms. As a result, you’ll likely get a different interest rate and new loan term. Upon approval, the new lender will pay off your old loan, and you’ll resume payments on the new loan. 

Depending on the change in your rate, you could save money in interest if your credit score has improved. But you could also pay more over the new loan term if you’ve been paying on the car for a while, as the lender will have even more time to collect interest from you. Still, the more affordable monthly payment on the new loan could make refinancing your auto loan a worthwhile maneuver. 

Why Should You Refinance Your Car?

There are several reasons why you may want to consider refinancing your car. Here’s a breakdown: 

  • Your credit score has improved since you purchased your vehicle or refinanced into the current loan, and you qualify for a lower interest rate. 
  • You want to reduce your auto loan payment and don’t mind paying additional interest over the life of the loan. 
  • You want to get a lower rate and make more than the minimum payment to pay off the loan early and save on interest. 
  • Your car’s resale value is either equal to or greater than what you currently owe on your loan. 
  • Your current lender does not charge prepayment penalties. 
  • Average auto loan rates have dropped, and you believe you could get a better deal by refinancing your existing car loan.

Refinance Your Auto Loan

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Read this Auto Approve review to learn how to get more competitive interest rates on your auto loans, and lower your payments.

When You Should Not Refinance Your Car

However, there are instances where getting a new auto loan may not make sense: 

  • You could pay hundreds or thousands of dollars more in interest during the loan term. 
  • Your new lender could charge loan origination fees or assess prepayment penalties if you want to pay the loan off early. 
  • Your vehicle is 10 years or older with 100,000 or more miles (as the lender may not approve you for a loan or charge you a steep interest rate).

How Often Can You Refinance Your Car?

You’re able to refinance your car as many times as you’d like if you can find a lender that will approve you for a loan. But as mentioned above, doing so may not be sensible. It depends on how low of an interest rate you can qualify for, as refinancing at the same rate or higher means you’ll pay far more in interest on the loan over time. Plus, you could end up forking over several hundred or even thousands of dollars to the lender in fees. 

Does Refinancing Your Car Hurt Your Credit?

If you are wondering if refinancing your car loan will hurt your credit score, first you need to understand the stages and how each will impact your credit.

Many lenders offer an online tool to get a rate quote without hurting your credit score. Consider leveraging this resource to gauge your approval odds and determine if refinancing makes sense for you.

If you’re pre-approved and decide to apply for a loan, a hard inquiry will be generated and could drop your credit score by a few points. But suppose you shop around with several lenders within a short span. In that case, all inquiries will be grouped together to minimize the impact on your credit score. 

When you open a new car loan, your credit score could also take a hit as the average age of your credit accounts will likely decrease. The upside is, with timely payments and sound debt-management practices over time, refinancing can actually improve your score in the long term.

How To Start The Process Of Refinancing Your Car

If you decide to move forward with refinancing your car, use an online platform like Auto Approve, to get the guesswork out of finding the right lender for you. Simply complete the quick online questionnaire on their website, and you’ll get quotes from lenders in the network right away if there’s a potential match. 

If approved, you could get a new auto loan with a rate as low as 2.25 percent. Research your potential options today with no impact on your credit score. Even better, it’s free, and there’s no obligation to move forward with a loan application if you decide that the offers aren’t a good fit for you. 

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