How Soon Can You Refinance A Car Loan?

How Often Can You Refinance Your Car?

Refinancing can be a good way to lower your monthly payment or get your car paid off sooner. Technically, there's no limit on how many times you can refinance your car. That being said, there are some considerations to keep in mind when refinancing your auto loan multiple times. First of all, most lenders have requirements surrounding the amount of on-time payments made and the minimum remaining loan balance when refinancing. They will also likely require your car to be under a certain age or have under a certain number of miles, usually 10 years and 100,000 miles.

In addition to conforming to the lender's requirements, it's also worth considering the effect refinancing has on your credit score. Every time you apply for refinancing, you'll likely trigger a hard inquiry on your credit, which will cause your score to take a small hit. While applying for refinancing in general won't make too much of a negative impact on your score, several inquiries over a short period are likely to be a red flag for lenders.

It's also worth considering that refinancing your car may have fees attached. Title transfer, registration, or potential early payoff penalties can add up if you refinance multiple times. You'll need to make sure your interest savings would outweigh the additional fees for refinancing multiple times to be worth it.

You'll also have to keep in mind that refinancing your car means that your loan term resets, which could extend the time that you're in debt or increase the amount of total interest you owe.

How Soon Can You Refinance a Car?

Typically, most lenders will allow you to refinance your car as soon as 60 to 90 days from the start of the original loan. That's long enough for them to realize that you've made a few on-time payments, ensure that the vehicle does not have any liens on it, and that your credit has stabilized or even improved after your initial purchase.

However, just because you can theoretically refinance your car this early into the loan, it doesn't mean that you should. There are drawbacks to refinancing too early. If your credit hasn't improved or if your vehicle is depreciating quickly, you will likely be saddled with less favorable loan terms than you had originally.

The best time to refinance your car is often between six months and a year after you first took out your loan. However, this primarily holds true if your credit has improved, interest rates have gone down, or you want to adjust the terms of your loan.

Reasons to Consider Refinancing Your Car

If you have a car you want to keep, but the terms of your loan aren't what you're looking for, refinancing can help. It makes the most sense to refinance if you need a little wiggle room in your budget.

The best way to do this is to refinance to a loan with a lower interest rate. Lowering your interest rate means paying less each month and saving on overall interest charges. But a lower interest rate isn't the only way to achieve a lower monthly payment. You can also get this by qualifying to refinance for a longer loan term. Keep in mind, though, that while this lowers your monthly expense, it doesn't save you overall unless you have a lower interest rate, too.

You can also refinance into a shorter loan term to help you pay off the car and get out of debt sooner. This is preferable to lengthening your loan term to reduce your monthly payment, as you will own your car sooner and can save on interest. But if you just want to be done with your loan sooner, there's no need to refinance if you aren't facing any prepayment penalties – Just make as many extra payments as you can, and you can be out of debt faster without refinancing.

Refinancing can also be a good way to remove a cosigner or switch lenders, although the above considerations still apply.

At What Point Does Refinancing Not Make Sense?

Refinancing your auto loan can be a good way of saving on your car, but in some scenarios, it can end up costing you money. The most glaring example of refinancing costing you money would be if your interest rate hasn't improved. If your credit, income, or debt situation hasn't improved, or if interest rates are rising as a whole, you're better off waiting until things get better before refinancing.

We also wouldn't recommend refinancing if you're already near the end of your initial loan. Most of the interest you'll pay is toward the beginning of the loan, so restarting the payment schedule will likely mean you end up paying more in interest overall, even if you're able to refinance at a more favorable interest rate.

Refinancing can be ill-advised or even impossible if your car has depreciated significantly since you first took out your loan. If you're upside down on your auto loan, lenders may offer you less favorable terms or even deny your application altogether.

Alternatives to Refinancing a Car Loan

If refinancing a second time isn't for you, now might be a great time to cash in on that vehicle you can no longer afford. With the scarcity of new and used vehicles right now, some dealers are willing to pay top dollar for quality trade-in vehicles. This means your car could be worth more than it might be when the market is flush with cars. Right now, cars are going for more than MSRP, and discounts are harder to find. Having a good trade-in can be a big bargaining chip in getting a more affordable car.

If you want to keep your current car, some lenders will let you recast your auto loan. To recast your loan, you'll have to make a lump-sum payment toward the principal. In turn, your lender will recalculate your loan based on the lower balance. You'll have to have cash on hand to make the lump-sum payment, and again, not every lender offers this option.

You can also try asking your lender for new loan terms due to hardship if you foresee having trouble making your payments. Although a less-than-ideal situation, modifying your loan terms due to hardship can help make your monthly payments more manageable without refinancing or having too much of an effect on your credit.

How Many Times Can You Refinance Your Car Loan?

Refinancing more than once may not help. If you already refinanced your car, you know that your credit situation must be good or improved to qualify, and your loan and vehicle both need to fit within the lender's parameters. What you may not know is that you generally need to wait to be eligible for refinancing, usually for at least one to two years after getting a loan.

This could put your vehicle at risk of falling outside the refinancing qualifications, either with age or accumulated mileage. If you know your vehicle is still good, consider your financial situation. Are you just barely eking by with your current auto loan payment? If this is why you need to refinance again, it could be a sign to a lender that you're overextended, not something that will help your chances of refinancing.

Also consider this: if you already extended your loan term, you're at risk of paying more for a car than it's worth. So if you stretch that payment out farther, you're only paying even more for a vehicle that might not be holding enough value to make that a good investment.

Ready to try refinancing again? If you still think that refinancing is the way to go, we want to help. Here at Auto Credit Express, we work with a large network of refinancing specialists who are ready to help. Simply fill out our fast, free auto loan refinancing request form to get started.