How to refinance your auto loan and possibly save hundreds of dollars a year

Could you use a little more breathing room in your budget each month? Try refinancing your auto loan!

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Here’s what you need to know about auto loan refinance

You're probably familiar with the idea of refinancing when it comes to a mortgage or maybe even student loans. But did you know you can refinance your auto loan?

Yes, it’s true, though not many people know about this potentially money-saving option.

A recent TransUnion study of 1.5 million refinance transactions in 2013 and 2014 found the average consumer reduced their interest rate by 2.4%, saving an average of $52/month doing an auto loan refinance in the process.

That’s big money back in their lives — and maybe yours, too, if you choose to refinance.

As a general rule, you're going to want to be sure you're up to date on your car payments if you're looking to do a refinance. After all, paying all your bills on time is each and every month is the #1 way to have good credit, so you can borrow money under favorable terms.

In addition, you shouldn’t owe more on the car than what it’s worth if you’re looking to do an auto loan refinance. In other words, you don’t want to be “underwater” or “upside down” on your vehicle.

If you do owe more on a vehicle than what’s it worth, it may not prevent you entirely from doing a refinance — but you’ll likely have to bring money to the closing table to achieve your goal.

Not sure if you're upside down in your car? You can pull up your vehicle's value at a site like Kelley Blue Book, which lets you search by the year, make and model of your particular vehicle.

With that as background, here’s the basic lay of the land when it comes to refinancing your auto loan…

Why would you refinance an auto loan? 

Most people consider refinancing their auto loan to reduce their out of pocket each month on the loan and/or to lower the total amount of interest they pay on their car note.

Who can help you refinance your auto loan?

Credit unions are a great place to do any kind of refinance, including an auto loan refinance. If you're not already a member, you can locate your nearest credit union at

Meanwhile, if you're looking for a national program, just about every major lender has an auto refinance program. This includes Bank of America, Capital One, Chase, Wells Fargo and others.

That makes it very easy to comparison-shop for quotes online. Here’s an example of current rates from Chase:

Rates subject to change without notice.

Are there any costs associated with auto loan refinancing?

In general, there’s no fee to apply for an auto loan refinance.

However, you may have to pay title and state fees — both nominal charges that vary by state — to complete your refinance.

Will the kind of vehicle I own prevent me from refinancing my auto loan?

Yes, that is a possibility, but it varies by lender.

For example, Capital One explicitly states it won't refinance a car loan for any Oldsmobile, Daewoo, Saab, Suzuki or Isuzu.

But in reality, banning specific nameplates from being refinanced like Capital One is pretty rare.

A more common scenario is that the age of your vehicle and your odometer reading will be factors that can make or break your application when it comes to an auto refinance.

For example, Wells Fargo won’t refinance any vehicle that has over 100,000 miles on it or that is eight model years or older. In another example, Bank of America won’t do it if your ride is 10 years old or older.

Capital One, meanwhile, has some of the most stringent guidelines among the major bank auto refinance programs. They require vehicles to be only seven model years old or newer for a refinance.

Anything else I should know?

You’ll need your car’s title, proof of insurance, and proof of income in order to close on your auto loan refinance.

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