Most banks will refinance an auto loan, but the ones most likely to approve you depend on your credit score and the age of your car
Refinancing an auto loan means taking out a new loan from a different lender to pay off your existing car loan. The new lender pays off the old one, and you make payments to the new lender instead. Banks refinance auto loans routinely, but not all banks will refinance every loan — approval depends on your credit history, how much you still owe, and how old the vehicle is.
The banks most likely to refinance are the ones you already bank with, credit unions, online lenders, and large national banks. Each type has different approval standards and different reasons to refinance with them. Understanding which banks refinance and what they look for helps you know where to start and what to expect when you contact them.
Key Takeaways
- Banks, credit unions, and online lenders all refinance auto loans, but credit unions often have lower rates and more flexible approval for members with fair credit.
- Your current bank may refinance your loan even if you have fair credit, because they already know your payment history with them.
- Most lenders will not refinance a car that is more than 10 years old or has more than 100,000 miles, though some credit unions and online lenders have higher limits.
- The amount you still owe must not exceed the car's current market value by much — lenders typically want the loan-to-value ratio to be 125 percent or lower.
- Refinancing makes sense when your new interest rate is at least 1 to 2 percentage points lower than your current rate, because closing costs and the time to break even matter.
Banks that refinance auto loans and their typical requirements
The largest national banks — Wells Fargo, Bank of America, Chase, and Citibank — all refinance auto loans. They typically require a credit score of 660 or higher, a car that is no more than 10 years old, and a loan-to-value ratio of 125 percent or less. These banks move slowly; approval can take one to two weeks, and they may require you to visit a branch in person to finalize the paperwork.
Regional banks and your current bank often have lower credit score requirements — sometimes 600 or above — because they can see your deposit history and payment record with them. If you have been banking with the same institution for several years and have no overdrafts or late payments, they may refinance even if your credit score is fair. Contact your bank's auto lending department directly; they can often give you a preliminary answer in one phone call.
Credit unions are the most flexible option for borrowers with fair credit. Most credit unions require membership, which usually means living or working in a specific area or belonging to a particular employer or organization. Credit union rates are often lower than bank rates, and they may refinance cars up to 12 years old or with up to 120,000 miles. Some credit unions will refinance even if you have a credit score as low as 580, though the interest rate will be higher.
Online lenders and how they differ from traditional banks
Online lenders like LendingClub, Upgrade, and SoFi refinance auto loans without requiring you to visit a physical location. They typically approve or deny your process within 24 to 48 hours and can fund the refinance within 3 to 5 business days. Online lenders often accept credit scores as low as 600 and may refinance older vehicles than traditional banks will.
The trade-off is that online lenders may charge higher interest rates than banks or credit unions, and they often charge an origination fee of 1 to 3 percent of the loan amount. Some online lenders also require you to have a minimum loan balance — often $5,000 or more — which means they will not refinance small loans. Read the fine print carefully; some online lenders charge prepayment penalties if you pay off the loan early, which defeats the purpose of refinancing.
Vehicle age and mileage limits across different lenders
Most traditional banks will not refinance a car older than 10 years or with more than 100,000 miles on the odometer. This is because older cars are more likely to break down, and if you default on the loan, the bank cannot recover much by selling the vehicle. Some banks will make exceptions if the car is in excellent condition and you have a strong credit history, but this requires a manual review and takes longer.
Credit unions and online lenders often have higher limits. Many credit unions will refinance cars up to 12 or even 15 years old if the mileage is reasonable and the vehicle is in good working order. Online lenders vary widely; some have no age limit as long as the car runs, while others stick to the 10-year rule. Before you explore, call the lender and ask about their specific limits for your vehicle's year and mileage.
Loan-to-value ratio and how much you can borrow
The loan-to-value ratio is the amount you owe divided by what the car is worth. If you owe $15,000 on a car worth $12,000, your loan-to-value ratio is 125 percent. Most banks will not refinance if your ratio is higher than 125 percent, because they would be lending more than the car is worth. If you are underwater on your loan, refinancing is not an option at most banks.
To find your car's current value, use the National Automobile Dealers Association (NADA) Guides, Kelley Blue Book, or Edmunds. These sites ask for your car's year, make, model, mileage, and condition, and give you a range of values. Use the lower end of the range when calculating your ratio, because that is what the lender will use. If your ratio is above 125 percent, you may need to pay down the loan before refinancing, or wait until the car depreciates less steeply.
Interest rate savings and when refinancing makes financial sense
Refinancing saves money only if your new interest rate is meaningfully lower than your current rate. Most financial advisors suggest refinancing only if you can lower your rate by at least 1 to 2 percentage points. If your current rate is 8 percent and you can refinance at 6 percent, the savings are real. If you can only get 7.5 percent, the closing costs and the time to break even may not be worth it.
Calculate your break-even point before you refinance. If the new loan has a $500 origination fee and your monthly payment drops by $50, you break even after 10 months. If you plan to keep the car for at least that long, refinancing makes sense. If you are planning to sell or trade in the car within a year, refinancing is probably not worth the cost and paperwork.
How to compare refinancing offers from different banks
When you contact a lender about refinancing, ask for a loan estimate that shows the interest rate, monthly payment, loan term, origination fees, and any other costs. Do not give them permission to run a hard credit inquiry until you have decided to move forward; multiple hard inquiries in a short time can lower your credit score slightly. Most lenders allow you to get a rate quote with only a soft inquiry, which does not affect your score.
Compare at least three offers side by side. Look at the total amount you will pay over the life of the loan, not just the monthly payment. A longer loan term lowers your monthly payment but costs more in total interest. A shorter term costs less overall but raises your monthly payment. The best offer is the one that fits your budget and saves you the most money over time.
Frequently Asked Questions
Can I refinance a car loan if I have bad credit?
Yes, but your options are limited and your interest rate will be higher. Credit unions and online lenders are more likely to refinance with a credit score below 620 than traditional banks are. You may also refinance with your current bank if you have a good payment history with them, even if your credit score is low. Expect to pay 2 to 4 percentage points more in interest than someone with excellent credit.
What happens to my old loan when I refinance?
The new lender pays off your old loan in full, and the old lender releases the lien on your car. You then owe the new lender instead. This process usually takes 3 to 7 business days. During this time, you may receive bills from both lenders; ignore the old one and pay only the new lender once the refinance is complete.
Do I have to refinance with a bank, or can I use a credit union?
You can refinance with a credit union if you are a member or can become one. Credit unions often have lower rates and more flexible approval than banks. You do not have to refinance with the same type of lender you borrowed from originally; the new lender just needs to pay off your existing loan.
What if my car is worth less than what I owe?
Most lenders will not refinance if you are underwater on the loan. You have a few options: pay down the loan until you owe less than the car is worth, wait until the car depreciates less steeply, or look for a credit union or online lender with higher loan-to-value limits. Some lenders will refinance up to 130 or 140 percent loan-to-value, though the interest rate will be higher.
How long does it take to refinance an auto loan?
Online lenders are fastest, typically funding within 3 to 5 business days. Banks usually take 1 to 2 weeks. Credit unions fall somewhere in between, usually 5 to 10 business days. The payoff of your old loan and the lien release can add another 3 to 7 days. Plan for the entire process to take 2 to 3 weeks from process to completion.