Best Auto Loan Refinance Lenders Of February 2024 (2024)

Best Auto Loan Refinancing Lenders of 2024

Summary: Best Auto Loan Refinancing Lenders

Company	Company - Logo	Forbes Advisor Rating	Forbes Advisor Rating - Image	APR Range	Loan amount	Minimum credit score	Turnaround time	Learn More CTA text	Learn more CTA below text	VIEW MORE
LendingClub		3.9		Starting at 4.99%	$4,000 to $55,000	510	2 days or more	Learn More	On Fiona.com’s Website
Consumers Credit Union (CCU)		3.8		Starting at 6.84% (with autopay)	Up to $600,000 (no minimum)	None	Same-day funding available	Learn More	On Consumers Credit Union’s Website
Navy Federal Credit Union (NFCU)		3.5		Starting at 4.54%	$5,000 minimum (no maximum)	Does not disclose	1 to 7 days	Learn More	On Fiona.com’s Website
U.S. Bank		3.2		Starting at 8.16%	Depends on area you live in	650	1 to 7 days	Learn More	On Fiona.com’s Website
LightStream		3.6		Starting at 7.74% (with autopay)	$5,000 to $100,000	660	Same day funding offered	Learn More	On Fiona.com’s Website
Bank of America		3.5		Starting at 7.39%	$7,500 minimum (no maximum)	580	Within one business day	Learn More	On Fiona.com’s Website
Capital One		3.4		Starting at 4.10%	$7,500 to $50,000	540	Within 1 business day of being approved	Learn More	On Fiona.com’s Website
PenFed Credit Union		3.4		Starting at 5.94%	$500 to $150,000	PenFed does not disclose this information	1 day or less after closing	Learn More	On Fiona.com’s Website
Digital Federal Credit Union (DCU)		3.4		Starting at 6.74% (with autopay)	Up to 130% of book value	DCU does not disclose this information	2 to 3 business days	Learn More	On Fiona.com’s Website

Tips for Comparing Auto Refinance Lenders

When comparing auto refinance lenders, consider these tips:

• Prequalify with multiple lenders.Some lenders offer prequalification, which lets you see what terms you may receive without impacting your credit score. This can help you compare interest rates, loan terms and other factors to determine your best option before submitting your formal application.
• Keep track of your credit score.There’s no standard minimum credit score requirement for an auto refinance loan. However, your credit score can significantly impact the terms you receive, such as your interest rate. We recommend a minimum credit score of 670 but aim for a score of at least 720 to land the best interest rates.
• Account for fees early on.Lenders typically charge fees and expenses up front, including lender, transaction, registration and loan origination fees. You may also encounter unexpected fees during the life of your loan. These can include a late payment fee or a prepayment penalty, which happens when you pay off the loan early. Consider these fees before selecting a specific lender.

What Does It Mean To Refinance a Car Loan?

When you refinance a car loan, you take out an additional loan to repay your existing debt in full. Some refinance lenders repay your old loan automatically while others require that you repay it manually.

Your new loan typically features a new repayment term, interest rate and fees that better suit your payment capabilities. For example, a longer term and lower interest rate could lower your monthly payments, saving you money over time.

Note that refinancing can temporarily hurt your credit score because it requires a hard credit check when you submit your application. Hard credit inquiries typically ding your credit score between one and five points. You can boost your score by repaying your loan on time every month.

Pros and Cons of Refinancing Car Loan

Refinancing your car loan can be financially beneficial if done strategically. The benefits could position you for long-term financial stability and success. However, in some instances, it can also hinder your financial well-being.

Consider the benefits and pitfalls of auto refinancing before deciding if it’s right for you.

Pros

• Better interest rates.If your credit score has improved since applying for your original car loan, refinancing can help you land a lower interest rate. Auto refinance rates change often, so it’s good practice to monitor them to find a rate that’s below the national average or better than your current loan’s rate.
• Lower monthly payments.You can lower your monthly payment by refinancing to a loan with a lower interest rate or longer loan term. However, while longer loan terms result in lower monthly payments, you’ll pay more interest over the life of the loan than you would with a shorter loan term.
• Faster repayment time.If you’ve increased your income and can put more funds toward your monthly loan payment, refinancing to a shorter term with higher monthly payments could allow you to pay off your loan faster.
• Debt consolidation.If you used multiple loans to purchase your car, refinancing is a good way to consolidate your debt, which combines all of your debt expenses into one monthly payment.

Cons

• Higher overall interest.If you choose to refinance into a longer term loan, you’ll pay more interest over the life of the loan.
• Unexpected fees.Auto refinancing comes with additional expenses that blindside some borrowers. Some common fees include a title transfer fee, late payment fee and prepayment penalty—issued by the original lender.
• Vehicle depreciation.A vehicle typically loses 20% of its value in the first year after it leaves the lot and 10% every year afterward. As such, refinancing a vehicle that’s worth less than your loan brings negative equity—also known as being “upside down” on your loan. You won’t be able to trade the vehicle or take out any additional loans until you take care of the negative equity.

When Should You Refinance Your Car Loan?

Here are some instances in which it makes sense to refinance a car loan:

1. Your credit or income has improved.If you had bad credit when you took out your original car loan, you likely didn’t qualify for a low rate. But if you’ve been consistently making on-time monthly payments, your credit score might have improved. Or maybe you’ve fixed some inaccuracies on your credit report,improving your score. With better credit, you could qualify for lower rates when you apply to refinance. The new rate could result in a lower monthly payment, shorter loan length, or both.
2. Interest rates have fallen.Interest rates fluctuate constantly. If rates have decreased since you took out your original loan, it might be a good time to refinance. A lower rate can reduce your monthly payment and overall interest paid.
3. You need to lower your monthly payment.If you need some more wiggle room in your budget after a job loss or other issue, you could refinance for an extended term to reduce your monthly payments. Increasing the length of your loan will cost more in total interest over the life of the loan, but it can relieve the burden on your monthly budget.
4. You want to pay off your car sooner.Refinancing into a shorter term typically comes with lower interest rates. So if you have extra cash on hand, you might consider refinancing to a shorter term and paying off the car faster. Not only would you be eliminating the debt sooner, but you’d also save on interest owed and pay less overall.

Car Loan Requirements

Every lender determines eligibility differently, but there are some documents and information they typically require to refinance your auto loan.

• Personal information:You’ll need to prove you are who you say you are, so be prepared with a copy of your driver’s license or proof of residence, phone number and Social Security or another identity number. Lenders want to know that you’ll be able to repay your loan, so they’ll ask about your income, current debt and your employer’s information. They might also ask for a paycheck stub, a tax return or your employment history.
• Vehicle information:The lender will need to make an accurate valuation on the vehicle under consideration for financing, so they’ll want to know the VIN, make, model, mileage, year and registration number. You might also be asked to provide evidence of activeauto insurance.
• Current loan information:Be prepared to provide the name of your current auto lender, loan number, current balance, monthly payment and payoff amount. Typically, lenders like to see an on-time payment history of at least two years before they’re willing to approve you for refinancing. But check with your lender since it can vary.

How To Refinance a Car Loan

Theprocess of refinancing an auto loanisn’t that different from taking out an auto loan in the first place. Whenbuying a car, you’ll want to consider factors beyond the interest rate, like lender fees, how much you can borrow, lender turnaround time and minimum credit score requirements. Here are the steps you can take to refinance:

1. Collect your loan documents.Gather your current loan documents and information about your vehicle, like the vehicle identification number (VIN) and current mileage.
2. Shop around for a lender.You can refinance an auto loan at most of the same lenders that offer standard auto loans. It might make sense to start with the lender who services your current loan or a bank or credit union you already have a relationship with.
3. Complete the loan application.Filling out an application is typically a simple process. The lender will explain the loan terms before you’re required to sign anything.
4. Review the terms before you sign.Don’t rush into signing anything. If you’re uneasy or unclear, ask questions. Make sure you understand the terms clearly before you agree, including any fees and charges.
5. Close on the loan.Once your loan is approved, the lender willpay off your old auto loanand provide you with all of the signed documents. All future payments will now go to the new lender. Make sure to keep a copy for your records.

Methodology

We reviewed 22 popular auto refinance lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. Lenders who did not publicly disclose basic information of loan terms, like how many years they will finance or dollar minimums and maximums, were disqualified. We chose the best lenders based on the weighting assigned to each category:

• Loan cost:30%
• Eligibility and accessibility:25%
• Loan details:20%
• Customer experience:15%
• Application process:10%

Within each major category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges, applicable fees and available discounts. We also looked at minimum credit score requirements, maximum accepted mileages, whether each lender accepts co-signers or co-borrowers and the geographic availability of the lender.

Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like online application options, mobile apps and turnaround time.

Where appropriate, we awarded partial points depending on how well a lender met each criterion. Note that these rankings only comprise lenders that offer direct lending to consumers; companies that partner with multiple lenders or offer a lending marketplace were not included.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our.

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