How To Refinance a Car Loan in Six Easy Steps

Refinancing your car loan could save you money and only involves a few simple steps such as gathering documents, checking credit, and confirming your loan terms.
Written by Jason Tushinski
Reviewed by Jessica Barrett
Updated on Dec 22, 2022
To refinance your car loan, simply collect the necessary documents, check your credit, and apply.
Refinancing your car could save you money by reducing your interest rates and lowering your payments. Or, if your financial situation has changed since you purchased your vehicle, refinancing could allow you to
pay your car loan off faster
That’s why the web’s top car ownership app
has compiled all the information you’ll need to hunt high and low for a better
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Not only that, Jerry’s loan comparison tool can help you make sure that you’re paying the least amount of interest for the best terms, plus getting the best rate on
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Read on to learn more about how to refinance your car loan.
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Who should refinance their car loan?

You should consider refinancing your car loan if you can take advantage of an improved credit score.
If you’ve been diligently paying off your car loan and making timely credit card payments, you are in a great position to refinance your car loan on your own terms.
With better credit, you may qualify for better interest rates on a refinanced loan. You might even be able to shorten the term of the loan, or extend it if need be.
Refinancing might also be the right choice if your financial situation has changed since you took out your loan. Refinancing can allow you to lower or increase your monthly payments.
Keep in mind, there are
pros and cons to car loan refinancing
, which we’ll get to below.

When refinancing isn’t worth it

If your car’s current value is less than the value of a refinanced loan, it won’t be worth it to refinance.
has a tool that will help you determine your car’s worth.
Also, if you are close to the end of the loan, or there is no noticeable difference in what you’d pay with a new loan, refinancing probably isn’t the way to go.
So, if refinancing is right for you, here’s the best part—it barely takes any time at all!
Key Takeaway Refinancing gives you the flexibility to extend your loan or pay it off faster—so it might be a good option for you if your financial situation has changed since you purchased your vehicle.

How to refinance a car loan

1. Collect those documents

First things first—get your paperwork in order. That means you’ll need the following information:
  • A pay stub from your current loan
  • The current interest rate you are paying
  • A document that shows your remaining balance on your current loan
  • The phone number of your lender (in case you have questions)
When you find your loan contract, double check to make sure there aren’t any prepayment penalties (those could hinder your ability to refinance).
Once you have your documents in order, you’ll also need the following items:
  • Your driver’s license
  • Your car’s Vehicle Identification Number (VIN)
  • Proof of income
  • Proof of employment

2. Check your credit

As mentioned above, a
good credit score
is vital to securing a better interest rate on a refinanced car loan. If you are making your current car loan payments on time—as well as your other financial commitments—go ahead and check your credit.
You can review your credit for free once a year by using a service such as
. This will give you a good idea of where you stand.
A credit score of 740 or higher puts you in an excellent position to score better interest rates on a refinanced auto loan.
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3. Apply for a refinanced loan

You’ve got great credit—now it's time to apply!
In case you didn’t know, it is free to apply to refinance your vehicle loan, so apply to multiple car refinancers to give yourself the best chance at scoring an excellent rate.
When applying to multiple car refinancers, you’ll want to submit all of those applications within one 14-day window. Doing this ensures that only one hard credit inquiry is made against you. A hard credit inquiry can
hurt your credit score
, so make sure this happens only once.
Key Takeaway Apply to multiple refinancers to get the best rate. But make sure you submit your applications close together so only one hard credit inquiry (aka, credit report) is made against you.

4. Use an online refinance calculator

With your applications submitted, make sure the numbers add up. There are many online calculators you can use to see how your current car loan stacks up against a refinanced loan.
This will give you a good idea of how much you can save by refinancing.

5. Check your terms

When refinancing your loan, you are allowed to leave the term of the loan unchanged. You can also shorten or extend the term of the refinanced loan.
Shortened loan term: You may be able to shorten the length of the loan if you are confident you can make the payments on time. Your car payment will be more expensive, but you’ll save money in the long run because of the lower interest rate.
Extended loan term: Extending your refinanced loan is also an option. Stretching out your payments and paying less each month is appealing, but remember—the longer your loan is, the more interest you will pay.
Key Takeaway If you choose a shortened loan term your monthly payments will be higher, but you will pay less interest. An extended term means your monthly payments will be lower, but you’ll ultimately pay more interest.

6. Formally submit your application

If you are ready to refinance, submit the application to your lender of choice. Once they’ve responded and accepted you, there are a few things left to do.
Sign the new refinanced loan featuring a lower interest rate and new term. And double check with the new lender that they will pay off your old loan. Confirm with the old lender that your old loan has been paid off.
Once that is taken care of, you can start paying towards your new loan with a lower interest rate.

Jerry’s car loan comparison tool

You deserve a loan package that works for your budget and the confidence that you’re getting the best deal on your auto loan refinance.
There’s just one way to get both:
. This intelligent, AI-based app is the fastest, most accurate way to comparison shop for loan options—and you won’t have to spend loads of time making calls.
Jerry can also make sure you aren’t overpaying for
car insurance
. In fact, the average driver saves $800+ on car insurance a year when they use Jerry!
"Jerry does all the work for you. They compare rates across all the major providers in seconds and automatically sort the most convenient options for your budget! Give them a try!" — Satisfied Jerry Customer


When should I consider a refinanced car loan?

If your credit score has improved, and you pay your current car loan on time, it is definitely a good time to look into refinancing your car loan.

Can you refinance a car loan with a different bank?

Yes, you can refinance your car loan through a different bank. As long as you find a lender that's willing to work with you, you're ready to refinance.

Should I shop around?

Definitely shop around. You’ll be able to compare offers and determine where you’ll get the lowest interest rate. You may even be able to shorten the length of time it takes to pay off the new loan, and save yourself even more money in the process.
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