It can definitely be worth it to refinance your auto loan – as long as the timing is right. When you refinance, you get the chance to make your loan more affordable. There are good and bad times to refinance a car loan, and we’re here to explain just why that is the case.

The Right and Wrong Times to Refinance

Refinancing your auto loan can help you by making it more affordable in two ways: by qualifying for a better interest rate or extending the loan term.

If you’re looking to reduce your current interest rate by refinancing, make sure at least a couple of years have passed to give your credit score a chance to improve. If your credit hasn’t improved in a significant way, you aren’t going to get a better interest rate, and you may not even qualify for refinancing.

If you’re struggling to keep up with the monthly payment and it looks like you won’t qualify for a lower interest rate, you may be able to extend the loan term by refinancing. In this case, your monthly payment decreases to give you short-term flexibility, but your term increases and ends up making the loan more expensive in the long run.

If you’re on the opposite end of the spectrum and you can pay more each month, you don’t need to bother with refinancing. You can simply increase the amount you pay each month to get the loan over with sooner.

What about the wrong times to refinance? Well, if you currently have negative equity in your vehicle (when you owe more than the car is worth), most lenders aren’t going to approve you for refinancing, as they want a vehicle to have some equity in it.

Another situation where it’s not a good time to refinance is if you have an older car. Lenders typically have age and mileage restrictions on vehicles they’re willing to refinance, and if your car doesn't meet them, you aren’t going to be able to refinance it.

Where to Refinance Your Car Loan

Now that you know about how important timing is with auto refinancing, where do you go to do it? First, you should check with your current lender to see what they can offer you for refinancing.

Whether they approve you or not, you should still rate shop – the practice of applying with multiple different lenders. Rate shopping allows you to compare different offers and choose the best one. If you can, be sure to get at least two or three offers to pick from.

You have at least 14 days to shop around and make a decision when you rate shop. If you stay within this time frame, all hard inquiries made for the same type of credit only count against your credit score as one single hard inquiry. This way, your credit score doesn't have to suffer as you look for the best offer.

The Bottom Line

You usually can’t immediately refinance your car loan – especially if you have bad credit. Even if you could, refinancing an auto loan isn't worth it unless you can make it more affordable.

Auto Credit Express can help you find a refinancing offer if you fill out our quick and easy refinance request form. But if you're here because you need a car loan in the first place, we want to help with that, too.

We can get you connected to a dealership that knows how to handle bad credit, no credit, and other unique credit situations. Get your financing journey started by filling out our free auto loan request form right now.