Managing an auto loan is a great way to repair and rebuild damaged credit, while meeting a need for reliable transportation. With timely repayment, your credit situation can improve enough so that refinancing is an option.

Refinancing is when you apply for a new loan that a lender will take over, typically with lower interest rates. The question isn't if you should refinance, but when. So, if you’re ready to explore this option, congratulations on the hard work you have done improving your credit. And here are a few things to be aware of before refinancing.

What to Expect


Rebuilding credit is not a passive operation. Some forethought can save you a lot of money later on. When applying for the initial loan, always ask what penalties there will be with an early payoff, if any. Even if you didn’t plan ahead when you first took out the car loan, it may still be worth the penalties to refinance.

There will be a negative mark, or hard inquiry that will quickly fall off your credit history when refinancing because a new lender will be assessing your report. Some of the positive benefits with refinancing, and a challenge are:

  • Lower interest rates.
    Even a single digit difference in an interest rate can save you hundreds and even thousands of dollars over the life of the loan.
  • Down payments.
    A new down payment, while not necessary, can improve the terms of your new loan. It can also help close the gap between amounts owed, and the actual value of the vehicle. If you are upside-down on your loan, this will put you in a better position by eliminating negative equity.
  • Cosigners.
    If you had a cosigner to improve the terms of your first loan, and now your credit position has improved, you may be able to refinance in only your name. Or, if your credit has improved, and you have a cosigner available that you didn't before, you can get even better rates to save more money.
  • Extending the length of the loan.
    Use caution when refinancing to not extend the length of the loan to save money on monthly payments. This will effectively negate the amount of interest saved by allowing the lender to get that interest saved back from you.

Now What?

With the money saved in interest from refinancing your vehicle, your monthly payments will be lowered. A great way to pay off that vehicle is to keep making the same monthly amount that you made previously, to pay down the loan. In this way, you will save even more interest.

When you are ready to start the first steps to repairing your credit and are in need of a vehicle, Auto Credit Express can help. Finding a lender and dealership that will work with poor credit can be difficult, but we want to get you on the road to improved credit today. The first step is filling out our quick and secure application.