Can I Refinance My Car With the Same Lender?
If you’re thinking about refinancing a car, using your current lender again probably seems like the obvious choice — but it’s not necessarily your best option.
Going through the same lender can speed up the application process, since some of your paperwork and information would already be on file. However, some lenders don’t refinance their own loans, and even if they do, they might not offer the best deal.
Is it possible to refinance with the same lender?
Whether you can refinance a car loan with the same lender will depend on your lender.
Like snowflakes, each lender is unique. For example, it may have requirements for how many payments you have to make before you can refinance, mileage restrictions and, of course, rules about whether they refinance their own loans.
The best way to find out whether your existing lender will work with you for a refinance is to check out the lender’s website or give it a call. PenFed Credit Union, for example, does not refinance its own auto loans, while Bank of America does.
While your original auto lender may be able to offer the best terms on an auto loan refinance, you may find a better deal elsewhere — and you won’t know unless you shop around! Read our tips for avoiding common car refinancing mistakes.
When does it make sense to refinance your car loan?
There are two good times to refinance a car: If you can get a better (lower-cost) loan or if you need a more affordable monthly payment. Of course, it also helps if your current lender doesn’t charge a prepayment penalty.
If your budget is tight, refinancing may give you some breathing room. It might allow you to lower your monthly payments through a lower interest rate or by stretching out your loan repayment over a longer period of time. Just note that the latter option means that you’ll pay more interest over the life of the loan, increasing your total cost to borrow.
If your goal is to secure a lower APR, refinancing may help. You’re most likely to get a lower rate or better terms if one or more of the following has happened since you took out your original loan:
- Interest rates have dropped
- Your credit improved
- Your car gained equity (meaning the value of your car is greater than your loan balance)
If you have dealer-backed financing, you might also be able to get a more affordable loan by refinancing through a bank or credit union.
Why you should shop around for a refinance loan
Refinancing offers can really vary from one lender to the next. The only way to find the best refinance loan for your needs is to take some time and compare quotes from multiple lenders.
You could find a lower rate
Each lender has a unique range of APRs based on lots of variables. Shopping around can help you discover the lowest, most cost-saving rates available for your vehicle, your credit scores and your financial situation. You may even be able to use low rate quotes to help you negotiate a better deal with your original lender.
You could qualify for better terms
Interest rates aren’t the only reason to shop around. Some lenders offer unique refinancing terms, including no down payment requirement, extra-long repayment periods or a 60- to 90-day grace period before your first payment is due.
It likely won’t hurt your credit score
Each application for an auto refinance loan can drop your credit scores by a few points, making it harder to get approved for a loan. But if you approach rate shopping the right way, you can avoid multiple hits to your credit.
According to FICO, when you submit all of your applications within a 14-day “rate-shopping” window, they’ll only be counted as a single hit to your credit score. Plus, the loss of points won’t be reflected until after you finish shopping around.
You can also minimize credit damage by applying with lenders who do a “soft pull” or “soft inquiry,” rather than a hard inquiry, when you ask for a rate quote.
Frequently asked questions
If you have bad credit, you may have limited opportunities to refinance your car. Not all lenders offer auto refinancing for bad credit, so your best bet is to check with your lender and consider shopping around. You may qualify for lower rates if you take the time to improve your credit score before applying for auto refinancing.
When you refinance, the new loan replaces your old loan. The refinance loan will pay off the original loan and you’ll begin making payments on the new account.
Some lenders don’t refinance their own loans. You can find out if your lender offers this option by checking the information on their website or by giving them a call.