In this article:
Perhaps interest rates have gone down and you'd like to score a lower rate—and ideally a lower monthly payment—on your car loan. One way to do this is by refinancing your car loan.
Although you may be able to refinance your car loan with the same lender, keep in mind that some lenders don't offer refinancing options or won't refinance older, high-mileage or low-value cars. Your current lender also may not offer the best rates and terms, so not shopping around could mean you're missing out on some solid savings.
Here's what you need to know about refinancing your car loan with the same lender, and how to determine if you may be better off choosing a new lender.
How Auto Loan Refinancing Works
Auto loan refinancing involves trading your current car loan for a new loan. Proceeds from the new loan go toward paying off your current loan. You then start paying off the new loan.
Just as you did with the original loan, you'll need to submit an application for the refinancing loan. The lender will then check your credit and other factors. If it approves your application, it will tell you the interest rate, terms and payments you qualify for. If you go ahead with the loan, the lender will pay off your existing loan and issue your new loan.
Learn more >> How Many Times Can You Refinance a Car Loan?
Can You Refinance Your Car Loan With the Same Lender?
Yes, you often can refinance your car loan with the same lender. However, some lenders might not provide refinancing loans or might limit what types of cars or loans qualify for refinancing. Reasons a lender might not refinance your car loan include:
- Your car isn't in great shape.
- Your car's value is low.
- Your car has racked up a lot of miles. Some lenders might not refinance a car with more than 100,000 miles, for example.
- Your car is considered too old. For some lenders, 10 years might be the cap.
- Your car is considered too new.
- Your existing loan has few payments left.
- Your existing loan has a lot of payments left.
Reasons to Refinance With the Same Lender
Among the reasons to refinance your auto loan with the same lender are:
- You may be able to gain a lower interest rate because you're an existing customer.
- The lender already has much of the information required for your application.
- You might not need to do much shopping for a refinancing loan if you get a good deal from your current lender.
- Your current lender delivers great customer service.
- You can avoid the hassles of switching to a new lender.
Reasons to Refinance With a Different Lender
Among the reasons to refinance your auto loan with a different lender are:
- Your current lender doesn't refinance car loans.
- You can get a lower interest rate from another lender.
- Your credit score has dropped or your car doesn't meet your current lender's requirements, so the current lender wouldn't approve you for refinancing.
- You're unhappy with the customer service at your current lender.
- You've relocated to a different place, and your current lender's branches are no longer convenient.
When to Consider Refinancing Your Car Loan
Here are some of the signs that it might be time to refinance your car loan:
- Lower interest rate: If interest rates have fallen enough, refinancing your car loan might give you a lower rate and trim your lending costs. Keep in mind that the savings on interest should exceed any costs you wind up paying to take out a new loan.
- Improved credit: If your credit score has risen since you took out your original car loan, you may stand a good chance of securing a lower interest rate and better terms when you refinance.
- Better loan terms: Refinancing your car loan might provide better terms, such as a 60-month payoff period rather than a 72-month payoff period.
- More affordable payments: Taking out a refinancing loan might enable you to reduce your monthly car payments.
- Less income: If your income has dipped, you might benefit from refinancing your loan to decrease your monthly car payments.
- Prepayment penalty: Paying off your current car loan early might trigger a prepayment penalty. If the math shows refinancing with another lender would help you steer clear of a prepayment penalty that would be heftier than expenses associated with a new loan, you may want to look into refinancing.
Learn more >> Will Refinancing My Auto Loan Hurt My Credit?
The Bottom Line
Before you consider refinancing your car loan with the same lender, weigh the pros and cons. For example, while you might be able to lower your interest rate by refinancing with your current lender, you may be disappointed by your current lender's customer service and ready to switch to a lender that you believe will treat you better.
No matter which lender you choose, be sure to check your free Experian credit report and FICO® Score☉ ahead of refinancing your car loan. If you see any glaring factors that could be holding your credit score back, work to improve them before applying for a car loan refinance for the best chances of good rates and terms.