How Often Can You Refinance Your Car?
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
You may refinance your car loan as often as you’d like — so long as you can find someone new to lend you the money. You might even save enough cash to make refinancing worth your while, just be careful the fees and interest don’t eat up any savings you may gain.
Exactly how many times can you refinance your car loan?
How long do you have to wait to refinance your car loan?
How often should you refinance your car loan?
When is it a good idea to refinance your car loan?
How to refinance your auto loan
Risks to consider
The bottom line
There is no legal limit on how many times you can refinance a car. That said, the lender you want to refinance with must agree, and each has its own rules. Lenders are in the business to make money, and if a lender sees that you have already refinanced your car several times, it might decide not to issue a loan offer.
You could, in theory, refinance your car loan immediately — there is no state or federal legal waiting period before you can refinance your car loan.
Yet some lenders want to see a track record or a minimum period where you made timely payments in full. For example, a bank may require you to have your current auto loan for a set period of time before they will consider you as a candidate for refinancing.
You should refinance your car loan often, as it will save you money or help you out of a tough financial spot. This means you will probably not have a reason to refinance every month or even every few months, but instead, you could refinance your auto loan when you have a financial accomplishment — or a setback. A promotion may mean a salary bump that improves your debt-to-income ratio, making you a more attractive bet for lenders. A layoff and drop in salary, on the other hand, may mean you need to refinance for lower payments. We’ll describe the pros and cons of refinancing in more detail below.
It’s a good idea to refinance your ride in two situations: when you need a lower payment or it could save you money.
If you need a lower payment. You might be able to refinance and reduce your monthly payment amount by getting a lower APR and/or getting a longer-term loan.
Be aware that a longer-term loan usually means you’ll pay more in interest over time. You could refinance for a lower payment now and when your finances improve, either refinance again for a shorter term or put more money toward the loan (if there’s no prepayment penalty) so you’ll pay it off early. Both ways could help you to not pay as much in interest. You could read this on how to get the lowest refinance rates.
If you could save money. A main goal of refinancing is to pay less in interest. You may qualify for a lower APR if your credit score or income improved since you first signed for your current auto loan. You can check your credit score here if you don’t know what it is. If it isn’t what you expected, you can check out how to refinance your auto loan with bad credit.
Look up which lenders offer auto refinancing and get multiple offers. Talk to your current lender to see if they would accept an application. Don’t be surprised if they don’t; not all lenders who offer auto loans also offer auto refinancing and some won’t refinance their own loans. You can read more about the best places to seek auto refinancing. Potential lenders include your bank and credit union. Also consider filling out an online form at LendingTree, where you could get up to five potential auto refinance offers from lenders.
Remember financing your first auto loan? Refinancing your auto loan often comes with many of the same pitfalls, plus a few new ones. Here’s how to avoid them.
Impact on credit. You have a 14-day window in which you can apply to multiple lenders and it won’t hurt your credit any more than if you applied to one lender. Most loan offers are good for one month, but if you wait longer than that to accept the loan offer, you’ll have to fill out another application, which could ding your credit.
Becoming upside down. Long-term loans spread out the cost of the car, but by the end of the loan, you may owe more than what the car is worth. This is what’s known as negative equity or being upside down in your loan. If you are already upside down, you can read here about how to refinance an upside down car loan.
Long-term interest. Even if you refinance to a lower APR, it may come with a price: a long loan term. A longer term can mean that the interest adds up to more than what you would have originally paid. Make sure that when you’re refinancing, you get a total dollar amount of how much the interest will be.
Fees. Each state charges a titling fee when a new loan is made. And each lender may charge different fees, such as origination fees and processing fees. If you save $500 on interest by refinancing but the fees for refinancing add up to $550, then you’d lose money.
Add-ons. Your lender may offer add-on products to you, such as an extended warranty or GAP. They can be expensive — in the thousands of dollars — but you might not notice as their price is spread throughout your new loan. If your payment is lower overall, even with those things included, you may not question it and just say OK.
Read the fine print in your new loan agreement before signing anything and talk about the add-ons, if there are any, with your lender. Ask how much each feature costs in total, not monthly. And don’t be afraid to say you don’t want them. After all, you’re refinancing in order to save money, not spend $2,000 on a warranty.
Refinancing can save you money, either in the short term with a lower payment, in the long term with lower interest or both. You can refinance as many times and as often as you want, as long as a lender will do the refinancing. Pay attention, though, to any fees and the dollar cost of the total interest you would pay. Know how much refinancing will cost you, including the APR in a total dollar amount, to see if it’s worth doing.
The way to get your best deal and ensure you’re paying the least to refinance is to shop around for your best offer.