When you refinance a car loan, what happens?

My hours were cut back at work, and I’ve been struggling to make my monthly car loan payments. My parents told me I should think about refinancing my car loan. But when you refinance a car loan, what happens?

Answer
I’m sorry to hear about the reduced hours, but your parents are right. Refinancing might be a good option if you’re struggling to make the monthly payments. When you refinance your car loan, you are entering into a new loan agreement with an updated interest rate and terms. The new lender pays off the old loan and you only owe money to the new lender.
To refinance your car loan, submit an auto refinance loan application with your current lender or new ones. To find the best interest rate and terms, shop around and compare offers from a few lenders.
In addition to the documents used when applying for the initial loan, will also need to provide:
  • Your current monthly payment
  • The remaining balance
  • The remaining loan term in months
  • Your interest rate
Once you submit your application, lenders check your credit score and review the application to determine the interest rate and terms they are willing to offer. Before signing a new agreement, make sure you aren’t liable for any prepayment penalty.
Finally, look to save on other expenses like your car insurance.
If you want to ensure you aren’t overpaying for your coverage, you should download Jerry, an insurance comparison app that shops for low prices with over 50 different insurance companies.
You can get quotes in seconds, make changes at any time, and if you ever have any questions, agents are just a text away. The average Jerry user saves $879 a year on car insurance!
Jack Walsh
Answered on Nov 30, 2021
Jack is an insurance specialist and writer living in Buffalo, New York. He has a BA from Union College and worked as an insurance agent with Jerry before joining our content team. He enjoys using data and research to break down complex subjects and convey a story. In his spare time, Jack enjoys cycling, cooking, and exploring Buffalo’s beautiful waterfront.
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