Car refinancing companies range from traditional banks to credit unions to online lenders, and the best fit depends on your credit score and how quickly you need a decision
When you refinance a car loan, you are replacing your current loan with a new one, usually at a lower interest rate. The lender you choose matters because different companies have different rates, approval speeds, and requirements. Banks like Chase and Wells Fargo offer refinancing, but so do credit unions, online lenders like LendingClub and Upgrade, and specialized auto lenders. Your credit score, the age of your car, and how much you still owe all affect which lenders will work with you and what rate they will offer.
This guide explains what to look for when comparing refinance lenders, what each type of company offers, and how to move forward once you have found one that fits your situation.
Key Takeaways
- Banks, credit unions, and online lenders all offer car refinancing, but they have different approval timelines and credit score requirements.
- Your interest rate depends mainly on your credit score, the age of your vehicle, and how much you still owe compared to what the car is worth.
- Getting quotes from multiple lenders takes 10 to 15 minutes per company and does not hurt your credit score if you do it within 14 days.
- The refinance process typically takes 3 to 10 business days from approval to funding, though some online lenders move faster.
- You will need your current loan details, vehicle information, and proof of insurance before you contact any lender.
Banks and credit unions versus online lenders
Traditional banks like Chase, Bank of America, and Wells Fargo refinance car loans, but they usually require you to have an existing account with them or meet a minimum credit score, often 660 or higher. The advantage is that you can walk into a branch and speak to someone, and approval can happen the same day. The disadvantage is that the process is slower than online lenders and banks often have stricter requirements about the age of the car—many will not refinance vehicles older than 10 years.
Credit unions typically offer lower rates than banks if you are a member, and they are often more flexible about credit scores and older vehicles. You must be a member to refinance through them, which means joining first if you are not already. Some credit unions, like Pentagon Federal Credit Union and Navy Federal Credit Union, have online membership options that take a few days to complete.
Online lenders like LendingClub, Upgrade, and Lightstream move faster—often approving and funding within 24 to 48 hours—and they work with a wider range of credit scores. The trade-off is that you handle everything online and by phone, with no in-person option. Online lenders also tend to have fewer restrictions on vehicle age, though they still will not refinance cars with very high mileage or severe damage.
What your credit score determines
Your credit score is the single biggest factor in the interest rate you receive. A score of 750 or higher typically qualifies for the best rates, usually 2 to 4 percent depending on the lender and current market conditions. A score between 650 and 749 usually gets rates between 4 and 7 percent. A score below 650 makes refinancing harder—some lenders will not work with you, and those that do charge significantly higher rates, sometimes 8 percent or more.
If your credit score has improved since you took out your original loan, refinancing can save you hundreds or thousands of dollars over the life of the loan. If your score is still low, you may want to wait a few months while you pay down other debts or dispute errors on your credit report before you refinance. Checking your own credit score does not hurt it, and most lenders let you see an estimated rate without a hard inquiry first.
How to compare rates without damaging your credit
When you ask a lender for a rate quote, they usually do a soft inquiry first, which does not affect your credit score. Once you are ready to move forward, they do a hard inquiry, which does show up on your report. The good news is that multiple hard inquiries for car refinancing within 14 days count as a single inquiry for credit scoring purposes, so you can safely shop around with several lenders.
Gather your current loan details before you start: your loan balance, monthly payment, interest rate, and the remaining term. Have your vehicle information ready too—the year, make, model, mileage, and VIN. Most lenders can give you an estimate in 5 to 10 minutes once you provide these details. Write down the interest rate, monthly payment, and loan term for each lender so you can compare them side by side. A difference of even 1 percent in interest rate can save you hundreds of dollars.
Timeline from approval to funding
Once you are approved, the lender pays off your old loan and sends you the new loan documents to sign. This step usually takes 3 to 5 business days. After you sign, the lender funds the new loan, which can happen the same day or within 1 to 2 business days depending on the company. Some online lenders like Lightstream and SoFi advertise same-day funding, though that usually means same-day approval and funding if you complete everything early in the business day.
During this waiting period, keep making payments on your old loan on schedule. Do not assume the old lender has received the payoff yet. Once the new lender confirms the old loan is paid in full, you can stop making those payments. Your new lender will send you a new payment schedule and instructions for how to pay going forward—usually online, by automatic transfer, or by check.
Documents and information you will need
Before you contact any lender, gather these items: your current loan documents or a recent statement showing the loan balance and interest rate; your vehicle's title or registration; your VIN; current mileage; and proof of auto insurance. Some lenders also ask for recent pay stubs or tax returns to verify income, though this is less common for refinancing than for an original loan.
If you are still paying off the car, your current lender holds the title. The new lender will handle getting the title transferred to them, so you do not need to do that yourself. Once the new loan is paid off, the title will be released to you. Keep all loan documents and payment confirmations in one place so you have them if questions come up later.
When refinancing makes financial sense
Refinancing saves money when the new interest rate is at least 1 to 2 percent lower than your current rate and you plan to keep the car long enough to recoup any fees. If you have already paid half the loan, refinancing for a new 60-month term means you are extending the time you owe money, which can cost more overall even if the monthly payment drops. Use a refinance calculator to compare your total interest paid under the old loan versus the new one.
Refinancing also makes sense if your credit score has improved significantly since you got the original loan, if interest rates have dropped in the market, or if you need to lower your monthly payment because your financial situation has changed. It usually does not make sense if you are planning to sell or trade in the car within the next year or two, because the refinance process takes time and you will not benefit from the lower rate long enough to justify it.
Frequently Asked Questions
Does refinancing hurt my credit score?
A hard inquiry from the lender will lower your score by a few points temporarily, but the impact is small and fades within a few months. Multiple inquiries within 14 days count as one inquiry, so shopping around does not multiply the damage. Over time, refinancing to a lower rate and paying it off on schedule actually helps your credit because you are paying less interest and building a positive payment history.
Can I refinance if I owe more than the car is worth?
Most lenders will not refinance if you are underwater on the loan—meaning you owe more than the vehicle's current market value. Some credit unions and specialized lenders will, but they charge higher rates to offset the risk. If you are underwater, waiting until you have paid down the balance enough to be above water usually gets you a better rate.
What if my car is very old or has high mileage?
Banks typically will not refinance cars older than 10 years or with more than 150,000 miles. Credit unions and online lenders are often more flexible—some will work with vehicles up to 15 years old or 200,000 miles. Call a few lenders to ask about their age and mileage limits before you spend time filling out an process.
How long does the whole process take from start to finish?
From your first quote to having the new loan funded usually takes 5 to 10 business days. Online lenders can move faster—sometimes 2 to 3 days—if you complete everything quickly. Banks and credit unions typically take 7 to 10 days because they have more manual steps in their process.
What happens to my old loan if the new lender pays it off?
Your old lender receives the payoff amount from your new lender and closes the account. You will receive a final statement showing the loan is paid in full. The old account will stay on your credit report for several years but will show as closed, which does not hurt your credit. You should stop making payments to the old lender once you confirm the payoff has been received.