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How Often Can You Refinance Your Car?

Written by Banks Editorial Team

Updated December 21, 2023​

5 min. read​

Are you unsatisfied with your current auto loan and thinking about refinancing with a different bank or credit union? Some borrowers worry they won’t get approved, especially if they have already refinanced more than once. How often can you get a refinance on your current loan?

Even if you have gotten a refinance in the past, you can get one again. However, getting a new loan may not be a smart financial move, depending on your financial situation. Here’s what you need to know.

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What Does Auto Refinancing Mean?

First, auto refinancing entails swapping your current loan with a new one. This new loan has different terms, which typically means getting a different interest rate and new loan term. Upon approval, the new lender will use the new loan to pay off the old loan. Then, you will resume payments on the new loan. 

Depending on the change in your rate, you could save money on interest. Interest rates can decrease across loans and make a refinance enticing, but you can also get a lower interest rate if your credit score has improved since you got your first loan. You could also score lower monthly payments by extending the duration of your loan. But you could also pay more over the new loan term if you’ve been paying it 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 are some advantages to keep in mind before making this important financial decision: 

  • Your credit score has improved since you purchased your vehicle or refinanced into the current loan, and you qualify for a better interest rate. If you built up your score since applying for your first loan, now could be the right time to refinance. 
  • You want to reduce your auto loan payment and don’t mind paying additional interest over the life of the loan. Refinancing can save you money, and lower payments give you more room in your budget for other expenses.
  • You want to get a lower rate and make more than the minimum payment to pay off the loan early and save on interest. Monthly payments are higher if you go this route, but you save money in the long term. 
  • 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. You won’t have to worry about incurring fees for paying your loan ahead of schedule or getting a refinance.
  • Average auto loan rates have dropped, and you believe you could get a better deal by refinancing your existing car loan. Your current car loan may not reflect interest rate drops over the years. 

When You Should Not Refinance Your Car

However, there are instances where getting a new auto loan may not make sense. Under these circumstances, it may make sense to stick with your original loan: 

  • You could pay hundreds or thousands of dollars more in interest during the loan term. Lenders charge interest for the life of your loan, and the longer the loan lasts, the more interest lenders collect.
  • Your new lender could charge loan origination fees or assess prepayment penalties if you want to pay the loan off early. These payments show up each time you get your auto loan refinanced.
  • Your vehicle is 10 years or older with 100,000 or more miles. Financial institutions may not approve your application under this context or may set a higher interest rate on your loan.
  • Your current loan has a low balance. If the cost of getting a refinance approaches the remaining balance on your loan, it may make sense to continue making monthly payments, knowing that they will soon go away. It may not be worth the effort to get a refinance in this scenario.
  • You might get a higher interest rate. 2021 featured some of the lowest interest rates ever. It was a good time to refinance. Depending on when you took out your current loan, a refinance can help you secure a lower interest rate. However, not every loan offer will be as good as your current one. Refinancing to end up with a higher interest rate may not be the best option in this case. 
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How Often Can You Refinance Your Car?

There is no limit to how many times you can refinance your car. Borrowers can refinance multiple times, but a lender has to be on board with each of your requests. Each time you request a refinance, lenders will look at your credit score, debt-to-income ratio, and other factors to determine if you can keep up with the monthly loan payments. Having an auto loan does not guarantee that you will get approved for a refinance, and lenders have to assess risk before giving out loans.

If you can find a lender that will approve your request for a loan, you can get a refinance right away. But as mentioned earlier, doing so is not sensible in every case. 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. However, you could reduce your monthly car payment.

Does Refinancing Your Car Hurt Your Credit?

Your credit score is a valuable number, and loans impact that score. With many financial decisions and interest rates hinging on a good credit score, it’s no wonder borrowers consider the impact on their credit scores before making decisions. 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. The stage you are in determines the impact on your credit score.

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. You can receive multiple loan offers without any of them impacting your score. This is the pre-approval phase.

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. Refinancing multiple times results in multiple hard credit checks. 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 credit report in the long run. It can also make monthly payments more manageable. However, some borrowers risk falling behind on lofty monthly payments. If you are in this scenario, refinancing a car loan may be a good idea to protect your credit score.

How To Start The Process Of Refinancing Your Car

If you decide to move forward with refinancing your car, use an online platform like RefiJet to get the guesswork out of finding the right lender for you. RefiJet makes the refinancing process quick and easy. Their platform can provide immediate pre-qualification with no impact on your credit score. With RefiJet, you’ll have access to a variety of lenders offering competitive rates on auto loans that meet your needs.

Explore the options available by filling out the simple form on their website, and an auto refinancing expert will be in touch shortly. If approved, you could get a new auto loan with a better rate. 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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