You may also need to provide details about your car , such as:. Once your new loan is approved and you accept, your new lender will often pay off your old auto loan directly. You can sometimes do this online, or you may need to print, sign, and mail the required documents. LendingClub Bank can complete the title transfer process for you once you sign and mail a limited power of attorney LPOA form. If you have trouble remembering to pay your bill, consider enrolling in auto pay.
Also, contact your original lender to make sure your loan was paid off. Depending on when the funds were sent and applied to the loan, you may have to make a final payment. You may want to shop for auto loan refinancing if your income or credit score has increased since you first took out your auto loan.
Either situation may help you qualify for more favorable terms on a new auto loan. When interest rates fall, lenders may offer lower rates to attract new customers. Sometimes, lowering your monthly payments takes priority over getting a lower rate.
If you need to free up room in your budget, see if you can qualify for a loan with a longer term and lower monthly payment. While it might not be enough of a reason on its own to refinance, working with a new lender could be an added perk. Different lenders may have different requirements, underwriting methods, and refinancing rates—which is why comparing is so important.
In general, lenders will consider:. Lenders may refuse to refinance certain vehicle makes and models or have limits on how old the vehicle can be or how many miles it can have.
For example, LendingClub Bank requires your vehicle to be less than 10 years old and have fewer than , miles. Lenders may also look at the value of your vehicle relative to how much you owe on the loan, or the loan-to-value LTV ratio. Your monthly debt-to-income ratio DTI helps lenders understand how easy it will be for you to afford your monthly payment.
Qualifying for a new loan can be difficult if you have a high DTI. Having a long history of on-time payments and low balances on credit cards can help your credit.
With LendingClub Bank , you can quickly check your potential auto loan refinancing terms online with no impact to your credit score. If you qualify, you can receive and compare multiple loan offers before choosing the one that works best for you. You could consider refinancing your car loan when you can qualify for a new loan with more favorable terms, such as a lower interest rate or monthly payment.
These can include lien holder and state re-registration fees. An auto refinance could negatively impact your credit. Refinancing can save you money in interest or stretch out your loan payments, but you should only consider it when the circumstances are right.
If interest rates are lower or your financial situation has improved, it may be worth shopping around for a loan with better terms. Check out our article on how to refinance a car loan to learn more about the refinance process. If your finances have taken a hit because of COVID, you may be worried about making payments on your auto loan. You may also be looking to refinance your car loan to lessen your financial burden or take advantage of lower interest rates.
Many lenders have announced relief measures that could help. Check out our guide that explains what many auto lenders are doing to assist borrowers during this time. Read this post in Spanish. Image: Young man cleaning his newly refinanced car. In a Nutshell Refinancing a car loan could help you save money in the long run. Give it extra-serious thought if your financial situation has improved or interest rates have dropped since you took out your current loan. Some lenders also charge a processing fee on refinance loans, which can eat into the potential interest savings.
Virtually every time you apply for credit, the hard inquiry will reduce your credit score by a few points. That said, both of these factors are much less important in calculating your credit score than your payment history — and making timely payments on your new loan will increase your score over time. When you first borrowed money to buy a car, it may have been through dealer-arranged financing.
However, many banks, credit unions and online lenders offer direct financing to car buyers and owners. In some cases, you may qualify for a loyalty discount based on your existing relationship with the bank or credit union. Take some time to compare that quote with rate offers from other banks and lenders. This process can take some time, but the more options you compare, the higher your chances will be of getting the best auto loan terms available to you.
If you decide to move forward with a new lender, there is some required information that you should have prepared. Gather information about your existing loan, including the loan balance, monthly payment and payoff amount — the last one is the current loan balance plus any interest that has accrued between your last payment date and the day the loan will be paid off. Some lenders may also require proof of residence, such as a lease agreement, mortgage statement or utility bill, to make sure that they know where the car will be parked.
You also should prepare to share your credit score, income details and auto insurance information. The main mistake you can make when it comes to refinancing is timing. If any of the following scenarios apply to you, it may be worth it to stick with your current loan.
The primary reason to consider refinancing is if you can qualify for a lower interest rate and save money in the long run. Technically, you can refinance your car loan whenever you want, even shortly after you buy the vehicle.
But depending on where you are in the repayment schedule, your actual savings can vary. You can use a car loan refinance calculator to run the numbers for your situation to see how much refinancing can save you. How We Make Money. Rebecca Betterton. Written by. Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited By Chelsea Wing. Edited by. Chelsea Wing. Chelsea has been with Bankrate since early She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans.
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