What does refinance a car loan mean?

I don't have great credit but recently got a car loan. My interest rate is high and the dealership said I can refinance after making my payments on time for three months. How does refinancing a car loan work?

Answer
Congratulations on the new car! Getting a car loan is a big step, but it can be overwhelming when trying to understand all the terms and conditions.
Refinancing a car loan means renegotiating your terms and interest rate. It’s a common practice among lendees who initially took out a loan with less-than-favorable rates. Typically, once you prove you are less of a risk to a lender, they’ll allow you to refinance your loan for a better interest rate or shorter term.
Refinancing can help save you a significant amount of money on your loan and help reduce your loan term. Lower credit scores often have longer loan lengths, so refinancing can help reduce the amount of time you’re paying for your loan, too.
While you aren’t required to refinance, it typically will save you money in the long run. Before agreeing to refinance with your current lender, shop around. Every lender is different and you may be able to refinance elsewhere for better terms.
If you’d like help refinancing, try Jerry. The Jerry app helps find you the best rates for refinancing, without any of the hassles!
Emily Maracle
Answered on Oct 26, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.
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