Choosing auto loan refinancing to lower your car loan monthly payments is always a good choice! But which option is better: refinancing a car loan with the same lender or trying a new lender for better terms? Here’s our quick breakdown with all the pointers you need.
If you’re an average American, you’re probably reeling from price increases in the economy in the past few years. Gas prices are soaring towards $5/gallon, the average car loan monthly payments are touching $600, and new cars are at least $5000 costlier than a year before. If you want to cut costs, refinancing your current car loan seems like 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, for sure – especially if you have a good relationship with your current lender. However, there are more 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 existing loan with the same lender – provided 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 an impediment 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! Unless you shop around for rates, you’ll be making the same mistake all over again – choosing the first option you get. There are several other refinance lenders who 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
- Needn’t 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 as 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
- You can shop around with various lenders using platforms like Way.com
- 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
Many online platforms like Way.com help you pre-qualify for multiple lenders, compare their offers, and choose 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 paystubs, or a tax return.
- Update any personal information like address, marital status, etc.
- The lender will do a hard credit pull to check if you qualify for refinancing. It will likely impact your score temporarily.
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 approach 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 like Way.com, 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.
Also read: What documents do you need to refinance a car?
Why should you refinance your car loan?
Let’s face it – paying monthly payments as high as $600 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! With prices of even basic goods and commodities soaring due to supply-chain issues and labor shortages, car-related costs have risen to unmanageable levels.
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 car 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.
FAQs on refinancing with the same lender
Do you pay less if you refinance a car?
Typically, most people refinance their car loans to get lower APRs and pay lesser 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 chosen by you.
For example, refinancing a car loan for a long term (72 or 84 months) may reduce your monthly payments. However, you will pay more in interest charges over the course of the loan.
Can you refinance your car loan with the same bank?
Yes, you can refinance your car loan with the same bank as long as it does not explicitly have any rules against it.
Do I have to refinance a car loan with my current lender?
No, it is not mandatory for you 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.com, which shows you several rates from multiple lenders using a soft credit pull.
Can you refinance my car with the same bank?
Yes, several lenders will let you to refinance your current auto loan. Keep in mind that some lenders might not offer refinancing. Especially if your vehicle is in poor condition, has a low worth, or if you have few remaining payments on your current loan.
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 willing to lend you the money, there is no legal restriction on the number of times you can refinance your auto loan.
Can I refinance a loan with the same bank?
Yes, you can refinance a loan with the same bank.
Is it better to refinance a car with the same lender?
It is a great option to refinance a car with the same lender as you both already understand each other. This can help in better communication.
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We got your search for the best for your car simplified!