To lower your car loan’s monthly payments, it’s a good idea to choose auto loan refinancing. Between refinancing your car loan with the same lender and trying out a new lender, which one is better? Here’s our quick rundown with all the pointers you need.
Chances are you’re probably reeling from price increases in the economy in the past few years. Gas prices are soaring, and the average car loan monthly payments are rising. So, if you are thinking of cutting costs, refinancing your current car loan is the most logical step to take!
The next question you’ll probably ask yourself is, “Should I refinance my car loan with the same lender?” A valid question, especially if you have a good relationship with your current lender. But there are things to consider when choosing a lender to refinance!
Is it possible to refinance your car loan with the same lender?
Yes, you can refinance your current loan with the same lender, as long as the lender doesn’t have any rules against it. Some lenders mention that they will not refinance auto loans disbursed by them. If that’s not a hindrance and you’ve had a good experience with them so far, you can definitely refinance with the same lender.
However, just because you can refinance with the same lender doesn’t mean you should! Choosing the first option is not really ideal all the time because once you shop around for rates, you will realize that several other refinance lenders offer better rates, better loan terms, and even more discounts.
Is it easier to refinance a car loan with the same lender?
There are certainly some advantages to refinancing with the same lender:
- They already have the paperwork from when you first took out the loan.
- You don’t have to submit your personal details again, reducing your application time.
- You may already be familiar with the financial advisers and may share a good rapport with them.
- You needn’t pay too much in prepayment penalties for closing the current loan.
However, there is no guarantee that the same lender will give you the lowest APR you deserve.
On the other hand, refinancing with a new lender can have the following financial advantages:
- They might give you a better deal, with much lower APRs and better conditions than your current loan.
- Some lenders may have preferential rates for credit union members, which you can use to your advantage.
- They may also offer deals for bad credit borrowers, giving you a chance to improve your score.
We advise you to look for lenders in online platforms like Way.com which will help you pre-qualify for multiple lenders, compare their offers, and pick the one that suits your budget.
How to refinance with the same lender
Follow these steps to refinance with your current lender:
- The lender will already have your personal details from the first time you applied.
- However, you should submit your financial information once again. This includes your proof of income, recent pay stubs, or a tax return.
- Update any personal information like address, marital status, etc.
- The lender will perform a hard credit pull to determine whether you qualify for refinancing. This will likely temporarily impact your score.
Based on this, the lender will offer you a new loan to replace your existing one. Review the details well to ensure you are paying less in the long run.
How to refinance with a different lender
When looking to refinance with a new lender, you can do some rate-shopping before deciding on a
- You can speak to banks, credit unions, and other lenders to compare their rates individually.
- Use the rate-shopping window given by most credit bureaus to reduce the impact of hard credit inquiries each time you visit a lender.
- However, it’s much easier to use an online aggregator which shows you all the lenders and deals you qualify for.
- Some lenders even allow a soft credit pull, reducing the impact on your credit score.
- You get to compare rates and choose the deal that fits your budget.
- Once you choose your preferred deal, you will have to provide vehicle information (VIN, make, model, mileage, etc.) and information about the current loan (14-day payoff amount, loan term left, etc.).
After you submit all the supporting documents, there will be a hard credit check. Once you are approved, funding is typically done within a few working days.
Why should you refinance your car loan?
Let’s face it: paying monthly payments as high as $700 isn’t a sustainable way to organize your finances. And yet, according to Experian data, that’s what the average American pays on their car loan today!
It can put a lot of stress on your wallet to continue paying high APRs on your car loan while dealing with these spiraling prices. Therefore, it makes absolute sense that you refinance your car loan now and cut some corners while you can. The main reasons you should refinance your loan are:
- To get a lower APR: When you first took a car loan, you might’ve been charged a high APR due to your poor credit score, inconsistent payment history, or previous bankruptcies. However, if your credit score has improved since then, you can qualify for lower rates, which could save you at least a few hundred dollars annually!
- To get a lower monthly payment: Financial issues might be putting a strain on your budget. If you want more freedom to spend, you can refinance your auto loan to reduce your monthly payments by at least $80-100.
When is the best time to refinance your auto loan?
- If your credit score has improved: You might’ve been given a high APR earlier because of your low credit score. If it has improved since taking out your current loan, you can apply for refinancing and get a lower rate.
- When you’ve been consistent in your payments: Delays in previous payments or bankruptcies could have resulted in a higher APR on your current loan.
- When your car is getting older/ nearing the mileage limit: It’s best to refinance before the car hits 10 years or 100,000 miles.
- If you want cash for immediate expenses: Cash-out refinancing can help you get a larger loan based on the amount of equity you own in the vehicle. You can use the extra amount to pay for any urgent needs.
- When you want to buy out your lease: It’s much more convenient to buy out your lease than turn it in, especially if you’ve been using the same car for a while.
Frequently asked questions
Do you pay less if you refinance a car?
Typically, most people refinance their car loans to get lower APRs and pay lower monthly payments. However, how much you pay will ultimately depend on your credit score, payment history at the time of refinancing, and the new loan term you choose.
Can you refinance your car loan with the same bank?
Yes, you can refinance your car loan with the same bank if it does not explicitly have rules against it.
Do I have to refinance a car loan with my current lender?
No, you don’t need to refinance an auto loan with the same lender. You have the freedom to shop around with other banks, credit unions, and dealerships to find the best rates and deals you want. The easier thing to do is to check out a refinance aggregator like Way, which shows you several rates from multiple lenders using a soft credit pull.
How many times can you refinance your car with the same bank?
You may refinance your auto loan several times. If you can find a lender happy to lend you the money, there is no legal restriction on the number of times you can refinance your auto loan.
