Where to refinance a car loan

You can refinance a car loan through banks, credit unions, online lenders, and sometimes your current lender. The lender you choose depends on your credit score, how much you still owe, and what interest rate you can get. Banks typically require a higher credit score than credit unions, and online lenders often have faster approval but may charge higher rates. Your current bank or credit union should be your first stop — they already know your financial history and may offer you a better rate without a hard credit inquiry.

The refinancing process is the same regardless of where you go: the new lender pays off your existing loan, and you start making payments to them instead. This takes about one to two weeks from approval to funding. You keep the same car and the same loan term (or choose a new one), but your monthly payment and total interest paid usually change.

Key Takeaways

  • Credit unions and community banks often offer lower rates than national banks, especially if your credit score is below 700.
  • Online lenders can approve you in hours and fund within days, but compare their rates carefully because they vary widely.
  • Your current lender may refinance you without a hard credit pull, so call them first before shopping elsewhere.
  • You need to know your current loan balance, the vehicle's value, and your credit score before you contact any lender.
  • Refinancing makes sense only if the new rate is at least 0.5 to 1 percentage point lower than what you currently pay.

Banks and what to expect from each type

National banks like Chase, Bank of America, and Wells Fargo refinance car loans, but they typically require a credit score of 700 or higher and a newer vehicle (usually 2015 or newer). Their rates are competitive if you have good credit, but they move slowly — approval can take a week, and funding another week after that. Call your branch directly or visit their website to see if they offer auto refinancing; not all branches do.

Credit unions are often the cheapest option, especially if your credit score is between 620 and 700. You must be a member to refinance with them, but membership is usually free or costs $25 to $50 one time. Credit unions typically approve refinances faster than banks and are more flexible about the age and mileage of the vehicle. If you are not already a member of a credit union, search for one in your area at CO-OP or Alliant to see if you meet membership requirements.

Online lenders like LendingClub, Upgrade, and SoFi can approve you within hours and fund within one to three business days. They work with credit scores as low as 600 and accept older vehicles. The trade-off is that their rates vary more widely than banks, so you may pay more interest even after refinancing. Always get a rate quote from at least two online lenders before committing.

How to compare rates across lenders

Contact at least three lenders and ask for a rate quote. Most lenders offer a soft inquiry first, which does not hurt your credit score. You will need to provide your loan balance, vehicle year and mileage, and your approximate credit score. Write down the interest rate, monthly payment, loan term, and any fees each lender quotes you.

Calculate the total cost of the loan by multiplying the monthly payment by the number of months. Subtract what you currently owe in total interest over the remaining term of your old loan. If the new loan costs less overall, refinancing saves you money. Do not choose based on the lowest monthly payment alone — a longer loan term lowers the payment but costs more in total interest.

Once you have decided on a lender, they will order a vehicle inspection and appraisal (usually free). The appraisal determines how much they will lend. If your car is worth less than you owe, some lenders will still refinance you, but others will not. Ask about this before you formally explore.

What documents you will need

Have these ready before you contact a lender: your current loan documents (or the loan number and lender name), proof of insurance, your driver's license, and recent pay stubs or tax returns. Some lenders ask for a utility bill to verify your address. If you are self-employed, bring two years of tax returns and possibly a profit-and-loss statement.

The lender will order a vehicle history report (like Carfax or AutoCheck) and an appraisal on their own dime. You do not need to provide these yourself. Once they approve you, they will contact your current lender to request a payoff quote, then send the funds directly to that lender. You will receive a new loan agreement and a new payment schedule in the mail.

Refinancing through your current lender

Call your current lender first and ask if they offer rate reductions or refinancing. Many banks and credit unions will refinance existing customers without a hard credit pull, which means your credit score does not drop. They may offer you a lower rate based on your payment history with them, even if your credit score has not changed. This is the fastest route — some lenders can approve you the same day you call.

Your current lender already has your documents and knows your account history, so the process is simpler. If they cannot offer you a better rate, you can then shop with other lenders. The hard credit inquiries from other lenders will have a small temporary impact on your score, but multiple inquiries within 14 days usually count as one inquiry for scoring purposes.

When refinancing does not make sense

Do not refinance if you owe significantly more than the car is worth. Lenders will not refinance an underwater loan (where you owe more than the vehicle's value), and even those who will typically charge a much higher rate. Check your car's value on Kelley Blue Book or NADA Guides before you explore.

Refinancing also costs money in the form of process fees (usually $0 to $100), appraisal fees (usually $0 to $50, sometimes waived), and title transfer fees (varies by state, typically $50 to $200). If you are only a few months into your current loan or plan to sell the car soon, these costs may outweigh the savings. Calculate the break-even point: divide the total fees by the monthly savings to see how many months it takes to recoup them.

Red flags and what to avoid

Avoid lenders who may provide a rate without a credit check or appraisal — this is not how legitimate refinancing works. Do not refinance with a lender who requires an upfront fee before approval. Legitimate lenders charge fees only after you have been approved and are ready to close.

Be cautious of lenders who pressure you to extend your loan term significantly. A longer term lowers your payment but means you pay far more in total interest. If a lender's only selling point is a lower monthly payment, ask what the total interest cost is compared to your current loan. Also avoid refinancing multiple times in a short period — each refinance involves a hard credit inquiry and closing costs, and doing this too often can damage your credit score and cost you money.

Frequently Asked Questions

Can I refinance a car loan if I have bad credit?

Yes, but you will pay a higher interest rate. Credit unions and some online lenders work with credit scores as low as 600. Your rate will be higher than someone with a 750 score, so refinancing only makes sense if your current rate is significantly higher. Get quotes from at least three lenders to see if any offer a meaningful reduction.

How long does it take to refinance a car loan?

Online lenders can approve you in hours and fund within one to three business days. Banks and credit unions typically take one to two weeks from approval to funding. Your current lender may be fastest — sometimes same-day approval if you call and they have your information on file.

Will refinancing hurt my credit score?

A hard credit inquiry will lower your score by a few points temporarily. Multiple inquiries within 14 days usually count as one inquiry. Your score will recover within a few months. If you refinance with your current lender first, they may use a soft inquiry that does not affect your score at all.

What if my car is worth less than I owe?

Most lenders will not refinance an underwater loan. Some credit unions and online lenders will, but they charge a higher interest rate to cover the risk. Check your car's value on Kelley Blue Book before you explore. If you owe significantly more, refinancing may not save you money even with a lower rate.

Can I change my loan term when I refinance?

Yes. You can refinance into a shorter term (paying off the loan faster) or a longer term (lowering your monthly payment). A shorter term costs less in total interest but raises your monthly payment. A longer term lowers your payment but increases total interest. Choose based on what you can afford and how long you plan to keep the car.