If you’re looking to lower your monthly car payments you may want to consider refinancing your auto loan. The process of refinancing involves taking out a new loan to pay off your existing car loan. This can result in a lower interest rate which can save you money over the life of the loan.
A question many of our readers ask us is whether they can refinance their car loan with the same lender or not. In most cases, yes, but it really depends on the lender. If the lender does not offer refinancing then you will not be able to use them. If you do plan on refinancing then we suggest you work with your current lender as they’ll have your entire history with them and usually it makes it easier to get approval.
Key Takeaways
- Refinancing your car loan with the same lender is possible, but it depends on the lender’s policies.
- Refinancing can result in a lower interest rate and lower monthly payments.
- It’s important to evaluate all of your options and consider factors such as interest rates, fees, and loan terms before deciding to refinance.
Car Refinancing
If you’re considering refinancing your car, it’s important to understand what it means and how it works. Car refinancing is the process of replacing an existing auto loan with a new loan. The new loan typically has different terms, such as a lower interest rate, longer or shorter loan term, or different monthly payments.
A primary reason many refinance their car loan is to save money on the interest. With the way the economy is today, interest rates for larger purchases like a car or a home are at some all-time highs. A higher interest rate makes it much harder for individuals to get a new car, especially if you’re trying to buy a car with bad credit. If you refinance your loan and drop your interest rate considerably, you could end up saving thousands of dollars over the life of the loan. This benefits individuals that have a much longer loan period, such as 60-72 months, left. If you are more than 50% of the way through your car loan then you should not refinance as you’ll end up paying more in the long run.
Before you decide to refinance, you should consider all of the costs associated with the process. You may be required to pay additional fees for the application, a title transfer or even for paying off your current loan early. Extending the term of your loan could also result in paying more interest over time, even if your monthly payment is lower.
Benefits of Refinancing with the Same Lender
If you are planning to refinance your loan then we suggest you work with the same lender you have now. This can lead to tons of savings and even a higher chance of approval.
A few of the benefits of working with the same lender:
- Lower Fees – In most cases, the relationship you have with your lender could mean that they offer you $0 in fees or a drastically reduced fee cost to refinance. This is usually because the lender has all of your information up front and knows if they’d extend a new loan to you already. This can save them time and money to process the information and they’ll pass those savings onto you.
- Familiarity – If you’re in great standing with your lender and you choose to refinance to them then you will have a much higher approval odds for a new car loan.
- Customer Service – By having a relationship with the lender already you will get much better service than if you were a new customer. Banks, credit unions and other lenders want to retain their customers. The more money you’re paying them or using for their services the more money they make. You can leverage your relationship with the bank as a negotiating tactic.
It may be tempting to shop around for a new lender when refinancing, however, the benefits could outweigh costs of moving to a new one. You should still shop around to stay competitive to make sure you get the best rates.
How to Improve Your Approval Chances
Already being a customer of the lender you’re trying to get a refinance through will give you a pretty big leg up. However, they still have boxes they need to check to make sure you’re a good candidate for refinance and that you won’t default on your loan, even if you’ve been the best customer and made on-time payments for months.
Before you apply you should:
- Look at your credit score. If your score recently seen a large increase then you can benefit from a lower rate.
- Lower your debt-to-income ratio. Pay off any quick debts that you can to lower your utilization rate. The goal should be to keep your debt-to-credit ratio below 30% but most lenders, nowadays, want to see it even lower around 10%.
- Leverage the market trends. If the market isn’t hot right now for refinancing then it might make more sense to hold until the market is better. The goal with refinancing should be to shave whole percentage points off and not partial points. For example, going from a 5.5% interest rate to a 5.25% rate is not worth the refinancing but if you were going from a 12% to a 6%, that’s worth it.
- Negotiate your rate with the bank or prepay for interest. Don’t be afraid to negotiate for a better rate. Even though you’ve been a customer at this lender for awhile it is still in their best interest to make as much money off you as they can. Most lenders will come in at the very high end of their interest rate range they are willing to accept. By negotiating or being willing to walk away you can often see it lower 1-2% depending on where they started.
Frequently Asked Questions
Can you refinance a car loan with the same bank twice?
Yes, you can refinance a car loan with the same bank twice, but it may not always be the best option. Some lenders may have restrictions or penalties for refinancing too soon, so it is important to check with your lender first. Additionally, refinancing multiple times with the same lender may not always result in the best interest rate or terms.
Is it better to refinance with the same lender?
It depends on your individual situation. Refinancing with the same lender may be more convenient and faster since they already have your information on file. However, it is important to shop around and compare offers from multiple lenders to ensure you are getting the best interest rate and terms for your needs.
Does refinancing a car hurt your credit?
Refinancing a car loan may have a temporary negative impact on your credit score since it will result in a hard inquiry on your credit report. However, if you make your payments on time and in full, it can also have a positive impact on your credit score in the long run.
When you refinance a car loan, what happens to the title?
When you refinance a car loan, the new lender will pay off the remaining balance on your previous loan and become the new lienholder on the title. Once you have paid off the new loan, the lender will release the lien and you will own the car outright.
Can a dealership refinance my car?
Yes, a dealership may be able to refinance your car loan, but it is important to compare their offer with other lenders to ensure you are getting the best interest rate and terms. Additionally, some dealerships may charge higher fees or add-ons, so it is important to read the fine print before signing any agreements.
Best refinance car loan
The best refinance car loan will depend on your individual needs and financial situation. It is important to compare offers from multiple lenders and consider factors such as interest rates, loan terms, fees, and customer service. Some popular lenders for car loan refinancing include Credit Karma, Capital One, and LightStream.