The main places to refinance are banks, credit unions, and online lenders, each with different approval speeds and interest rates

When you refinance a car, you take out a new loan to pay off your existing one. The new lender pays your old lender in full, and you start making payments to the new one instead. People refinance to lower their monthly payment, reduce the interest rate, or shorten the loan term. The lender you choose affects how quickly you get approved, what interest rate you receive, and how the whole process feels.

Your three main categories are traditional banks (like Chase or Bank of America), credit unions (membership-based, nonprofit lenders), and online lenders (companies that operate primarily through websites and apps). Each has real differences in how they work, who they lend to, and how fast they move.

Key Takeaways

  • Credit unions often offer lower interest rates than banks and online lenders, but you must be a member and the process is slower.
  • Banks move faster than credit unions and have physical branches where you can ask questions, but their rates are typically higher.
  • Online lenders approve and fund loans in days rather than weeks, but their rates vary widely and you handle everything by phone or email.
  • 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 offer.
  • Getting quotes from multiple lenders takes 15 to 30 minutes per lender and does not hurt your credit score if you do it within 14 days.

Credit unions: lowest rates, but slower and membership-only

Credit unions are nonprofit organizations owned by their members. They typically offer the lowest interest rates for car refinancing because they do not have to generate profit for shareholders. If you are already a member of a credit union, this is often your best starting point. You can call or visit in person, speak to a real person about your situation, and get a sense of approval odds before you formally request anything.

The trade-off is speed. Credit unions usually take one to two weeks to approve and fund a refinance, sometimes longer. They also have stricter rules about the age of the car — many will not refinance vehicles older than 10 years, and some have a cutoff at 7 years. If you do not already belong to a credit union, joining one can take a few days to a week on its own, which delays the whole process.

To find a credit union you can join, use the CO-OP Network locator or the Alliant Credit Union website. Some credit unions let you join based on where you work, where you live, or membership in certain organizations. Others are open to anyone in a geographic area.

Banks: familiar, faster than credit unions, higher rates

Traditional banks like Chase, Wells Fargo, Bank of America, and regional banks in your area will refinance car loans. They move faster than credit unions — usually 3 to 7 business days from process to funding — because they have streamlined digital systems. If you already bank somewhere, you may get a small rate discount for being a customer, and you can walk into a branch to ask questions or resolve problems in person.

Banks charge higher interest rates than credit unions on average, and they have strict requirements about car age and condition. Most will not refinance cars older than 8 to 10 years. They also require that you have a good credit score — typically 660 or higher — to get approved at a reasonable rate. If your credit is below that, a bank may decline you outright.

Call your current bank first and ask what rate they would offer. Then call one or two other banks in your area to compare. Most banks let you get a rate quote over the phone without a hard credit pull, so you can shop around without damage to your credit score.

Online lenders: fastest approval, widest range of rates

Online lenders like LendingClub, Upgrade, and SoFi handle the entire refinance through their website or mobile app. They approve and fund loans in 1 to 3 business days, which is faster than any other option. They also tend to be more flexible about credit score — some will work with borrowers in the 600 to 650 range where banks would decline them.

The downside is that interest rates from online lenders vary dramatically. Two online lenders might quote you rates that differ by 2 or 3 percentage points, so you have to shop around more carefully. You also have no one to call if something goes wrong — everything happens through email, chat, or a phone number that connects you to a call center. Some online lenders specialize in people with lower credit scores and charge rates to match, so make sure you understand what you are being quoted before you commit.

Online lenders also have stricter rules about car age. Most will not refinance vehicles older than 7 to 10 years, and some have a mileage cap of 100,000 to 150,000 miles. Check these limits before you explore.

How your credit score and car age affect where you can refinance

Your credit score determines which lenders will even consider you and what interest rate you will receive. Credit unions typically approve people with scores as low as 600, banks usually want 660 or higher, and online lenders fall somewhere in between. If your score is below 600, a credit union is your best bet — call ahead and ask their minimum before you explore.

The age and mileage of your car matter just as much. Most lenders will not refinance a car older than 8 to 10 years, and some draw the line at 7 years. If your car is close to that cutoff, call the lender first and confirm they will work with your vehicle before you submit an process. A few lenders, like some credit unions and specialized online lenders, will refinance older cars, but their rates are higher because the risk is greater.

If your car is worth less than what you still owe on it — called being "upside down" — most lenders will decline you. Credit unions are most likely to work with this situation, so start there if it applies to you.

Getting quotes from multiple lenders without damaging your credit

You should get quotes from at least three lenders before you decide. The good news is that rate shopping does not hurt your credit score if you do it within a 14-day window. Multiple inquiries from lenders in that timeframe count as a single inquiry on your credit report.

Call or visit each lender's website and ask for a rate quote. Most will give you a preliminary quote based on information you provide — your credit score range, the car's year and mileage, and how much you owe. This quote does not require a hard credit pull. Once you have three to five quotes, compare the interest rate, the monthly payment, and the total amount you will pay over the life of the loan. A lower monthly payment might mean you are paying more interest overall, so look at the full picture.

After you have chosen a lender, they will do a hard credit pull and verify the car's details. This is when your credit score may drop slightly — usually 5 to 10 points — but it rebounds within a few months if you make on-time payments.

What happens after you choose a lender

Once you are approved, the new lender will contact your current lender to get the payoff amount — the exact sum needed to close your existing loan. The new lender then sends that money directly to your old lender, and your old loan is paid off. You will receive a notice from your old lender confirming the payoff, and you will start making payments to the new lender on the date they specify.

During this transition, you still own the car and can drive it normally. Your car's title will eventually be transferred to the new lender's name (they hold it as collateral), but this happens in the background and does not affect you. Make sure you have the car's current title and registration on hand when you explore, because the lender will need to verify ownership.

The entire process from process to first payment usually takes 2 to 4 weeks, depending on the lender. Online lenders are fastest at the approval stage, but credit unions and banks may be faster at the funding stage because they have fewer steps. Ask your lender for a timeline when you are approved so you know when to expect the first payment due date.

Frequently Asked Questions

Does refinancing hurt my credit score?

Yes, but only temporarily. The hard credit pull when you explore drops your score 5 to 10 points. The new loan also lowers your average account age, which can drop your score another 5 to 15 points. However, your score rebounds within 3 to 6 months if you make on-time payments on the new loan. The long-term benefit of a lower interest rate usually outweighs the short-term dip.

Can I refinance if I still owe more than the car is worth?

Most banks and online lenders will decline you if you are upside down on the loan. Credit unions are more willing to work with this situation, especially if you are a long-standing member. Call your credit union first and explain the situation. Some will refinance the full amount you owe, while others will only refinance up to the car's current value and require you to pay the difference out of pocket.

What if my car is very old or has high mileage?

Most mainstream lenders have age and mileage cutoffs, but some credit unions and specialized online lenders will work with older vehicles. Call ahead before you explore. Be prepared for a higher interest rate, because lenders view older cars as higher risk. If you cannot find a lender, you may need to wait until your car is paid off or consider selling it.

How much money will I save by refinancing?

That depends on your current interest rate, the new rate you are offered, and how much time is left on your loan. Use an online car refinance calculator to estimate your savings by entering your current loan details and the new rate you are quoted. Even a 1 percent rate reduction can save you hundreds of dollars over the life of the loan.

Can I refinance with a co-signer if my credit is poor?

Some lenders allow co-signers, but many online lenders and banks do not. Credit unions are most likely to accept a co-signer. If you want to add a co-signer, ask the lender directly before you explore. Keep in mind that the co-signer is equally responsible for the loan, so their credit will also be affected if you miss a payment.