Best Auto Refinance Companies

Refinancing an auto loan has the potential to lower monthly payments and you save money in overall interest fees. You might even be able to pay off your debt faster when you refinance, depending on the terms of the new loan you receive.

Yet you’ll need the right loan to accomplish these goals. And the process starts with finding the best auto refinance company for your situation.

Our Top Picks for Best Auto Refinance Companies

• Best for Low Interest Rates: PenFed Credit Union
• Best Marketplace: LendingTree
• Best for Fair Credit: MyAutoLoan.com
• Best for Rate Comparisons: LendingClub
• Best for Damaged Credit: AutoPay
• Best Extra Benefits: Caribou

Best Auto Refinance Company Reviews

Read below to discover our reviews and top picks for the best auto refinance companies of 2022.

Best for Low Interest Rates: PenFed Credit Union

PenFed Credit Union offers some of the most competitive interest rates for auto refinance loans. The lender doesn’t share its specific credit score requirements online. However, well-qualified borrowers may be able to refinance up to 125% of their vehicle value with APRs starting at 2.19%.

You’ll need to join the credit union before you can borrow from PenFed, but membership is open to everyone. Loan amounts with the credit union range from $500 to $150,000. And there are several repayment options available too—from 36 to 84 months.

LendingTree is a lending marketplace you can use to compare interest rates online from multiple lenders. If you want to compare multiple loan offers without a lot of legwork, this online lending platform could be a good solution.

When you visit LendingTree’s website you can fill out an Auto Refinance Rates comparison form with basic information (e.g., zip code, loan amount, and estimated credit score). From there, you’ll be able to review potential auto refinance offers from up to five lenders. If you find an offer you like, you can fill out an application to see if you qualify.

The lending partners in LendingTree’s platform offer repayment terms between 36 and 72 months on auto refinance loans. You can also use the company’s free auto loan refinance calculator to see whether a new loan offer might save you money (and how much).

MyAutoLoan.com is an online lending marketplace. You can use the platform to find auto refinance loans that may work for borrowers with fair credit (and those with good to excellent credit as well).

A fair credit score is 580-669 (FICO Score) or 601-660 (VantageScore), according to Experian. (Learn more about Vantage Score vs. FICO in this guide.) With credit scores in this range, it may be challenging to find a competitive auto refinance loan. But MyAutoLoan.com could help you find the best deal possible for your situation.

Loan amounts for auto refinance and lease buyouts vary by lender. You may be able to find repayment terms from 36 to 84 months through the MyAutoLoan.com platform.

LendingClub has an online platform that makes the process of rate comparisons simple and easy to navigate. Through LendingClub you can check auto loan rates from multiple lenders with only a soft credit inquiry that won’t affect your credit score. Even borrowers with credit problems might find loan options (though not necessarily with low rates).

Interest rates through the LendingClub platform start at 2.99%. Qualified borrowers may receive an auto refinance loan of $5,000 to $55,000. Repayment terms vary from 24 to 84 months.

AutoPay is our choice for the best auto refinance company for people with credit problems. Although the online lending marketplace doesn’t share exact qualification criteria, its website mentions that AutoPay lending partners may be willing to work with people who are rebuilding their credit.

The lowest APRs from AutoPay partners tend to be reserved for borrowers with excellent credit. The lending platform allows potential borrowers to see if they prequalify for financing and check rates with a soft credit inquiry that won’t damage their credit scores.

Borrowers may be able to finance as much as $100,000 through AutoPay. The platform’s network of lenders also offer a variety of repayment terms from 24 to 84 months.

Caribou is an online auto loan marketplace with extra benefits and add-on features that stand out from other companies. When you fill out the online form to compare rates from multiple lenders, you can also see if you’re eligible for a lower auto insurance premium with the same initial application.

In addition to these comparison features, Caribou also offers add-on products like GAP insurance, key replacement service, and a cosmetic care package for your used car. However, be sure to review the price of any ancillary products or services to make sure they’re worth the cost.

Caribou does charge a $399 processing fee—billed to the lender you choose. Some lenders may add the additional cost to your new loan amount when you refinance.

Interest rates from Caribou’s lending partners range from 1.99% to 36%. You can see if you prequalify and check your rate with just a soft credit inquiry. Loan amounts and repayment terms will vary by lender, but Caribou notes that most auto refinance loans range from 36 to 72 months.

Auto Loan Refinancing Guide

Understanding more about the refinance process and how it works could help you figure out the best move for your situation.

How does refinancing a car work?

When you refinance a vehicle, you take out a new loan and use it to pay off your existing auto loan. The debt doesn’t go away. However, it does transfer to a new loan, and typically to a new lender as well.

Once you accept a new auto loan, the terms of your previous financing agreement will no longer impact you (unless there’s a prepayment penalty). Instead, a new interest rate will kick in with new monthly car payments and new repayment terms.

If the new repayment period is longer than what was in place with your previous loan, your monthly payment might decrease. Spreading a debt out over a longer term can have that result. But just because your monthly payment goes down doesn’t mean you’re saving money. You could wind up paying more interest over the life of your new loan (compared with your previous financing agreement).

However, if your new loan features a better interest rate, there could be an opportunity for savings when you refinance. This may be especially true if you choose a new repayment term that’s similar or shorter to the remaining payment period with your current lender.

When can you refinance a car loan?

If you can satisfy a lender’s qualification criteria, you can refinance a car loan at any time. However, auto refinance lenders may have restrictions that pertain to a borrower’s minimum credit score, annual income, debt-to-income (DTI), and more. Your vehicle may also need to satisfy certain lender conditions, such as not having too many miles and not being too old.

There are several reasons you might want to refinance a car loan, including:

• Your credit score has improved.
• You didn’t shop around for the best rate on your original loan.
• Your income has increased and you want to shorten your loan term.
• There’s equity in your car that you want to borrow against with a cash-out refinance.

How to refinance a car loan

Below are five general steps you may need to take to refinance auto loans.

5 steps to apply for auto refinance

1. Start with a credit check.
   
   When you apply for an auto refinance loan, lenders and financial institutions may start by checking your credit report and score from Equifax, TransUnion, or Experian. Good credit or excellent credit could improve your chances of an approval and a good loan offer. Poor credit could hold you back. Checking your three credit reports and scores can help you understand where your creditworthiness may stand in the eyes of lenders. Then you can shop for loan offers that may be the best fit for you, and avoid applying for auto refinance loans for which you might be ineligible due to the lender’s credit requirements.People sometimes wonder how to remove negative items on a credit report. If the negative information is incorrect, you can dispute it with the appropriate credit bureau in an attempt to fix your credit.
2. Compare loan offers from multiple lenders.
   
   It’s essential to compare several refinancing options before you accept a new loan. If you skip this step, you might not find the best auto loan available for your situation. Worse, you might find yourself on the receiving end of an auto loan rate discrepancy without realizing it.Consider the following scenario. The difference between a 5.5% and a 7.9% APR might not seem significant. But over the life of the loan, you might pay thousands of dollars in extra interest by accepting the loan with a higher interest rate.
3. See if a lender will pre-approve you.
   
   Once you find a loan offer that you believe will work for your credit profile, it’s time to see if the lender will pre-approve you. Many lenders will allow you to check your eligibility for financing and review your estimated interest rate before you fill out a full loan application. Better yet, a pre-approval check won’t impact your credit score if the lender performs a soft credit inquiry during the process instead of a hard credit inquiry.
4. Apply to refinance your auto loan.
   
   The next step in the car loan refinance process is to fill out a full application with the lender of your choice. Be prepared to share information about your identity (e.g., name, address, Social Security number, etc.), your income and job status, and more. The lender may also ask questions about your current auto loan, such as your remaining loan balance.The lender will use these details to assess your risk level as a borrower. It will also use the information you provide to make you a loan offer or deny your loan application accordingly.
5. Review loan terms and accept.
   
   Having a lender approve you for financing can be a great feeling. But you shouldn’t accept a new auto loan without taking the time to review your official loan offer.Even if you received a loan estimate from the lender during the prequalification process, you’ll want to look over the final loan terms before you sign on the dotted line. Pay close attention to details such as APR, fees (origination fee, prepayment penalty, etc.), loan payments, repayment term, and more.

Documents needed

With many types of loans, auto refinance loans included, a lender may require you to submit key documentation along with your loan application. Here are some of the documents a lender might request when you apply to refinance an auto loan.

• Driver’s license
• Copy of Social Security card
• Proof of address (e.g., utility bill, bank statement, lease agreement, etc.)
• Proof of income (e.g., pay stubs, W-2 or 1099, tax returns)
• Vehicle information (e.g., make and model, VIN number, mileage, etc.)
• Proof of insurance

How to refinance your car loan with bad credit

Many lenders require a minimum credit score from applicants who wish to refinance their auto loans. A credit history check may also take place during a loan application, and the lender may review your credit report to see how you’ve managed your credit obligations in the past.

A low credit score or negative information on your credit report (e.g., collection accounts, charge offs, bankruptcies, etc.) could put you in a difficult position as a borrower. You might have a hard time qualifying to refinance your auto loan with bad credit—especially if you hope to receive a lower interest rate on your new loan offer.

Some lenders may be willing to work with you despite your credit problems. Yet to offset the added credit risk, these lenders are likely to charge you more. Depending on the interest rate and fees that a lender charges, refinancing a car loan might not make sense. If you’re unhappy with the loan offers you’re getting (or the lack thereof), you can always work to improve your credit and try to apply for financing with better rates down the road.

There are numerous strategies you can try to fix your credit, from debt consolidation to opening new positive accounts and managing them well. Improving your credit typically takes time, but the best credit repair companies might be able to offer support or guidance to help you (as long as you’re comfortable paying for such services).

How We Chose the Best Auto Refinance Companies

We chose the best auto refinance companies by comparing the financial products and services different lenders had to offer. Some of the key factors we considered are as follows.

• Cost: The interest rate and fees a lender charges determine how much it will cost you to borrow money. Lower-cost auto loans have the potential to save you money—sometimes a significant amount.
• Reputation: It’s important to work with trustworthy companies when you refinance a loan since you could be dealing with the new lender for many years. Reviewing consumer reviews, disclosures (regarding lending partners and more), and searching for complaints with government agencies may help you spot any red flags.

Summary of the Best Auto Refinance Companies

• Best for Low Interest Rates: PenFed Credit Union
• Best Marketplace: LendingTree
• Best for Fair Credit: MyAutoLoan.com
• Best for Rate Comparisons: LendingClub
• Best for Damaged Credit: AutoPay
• Best Add-Ons: Caribou

Money Research Collective’s editorial team solely created this content. Opinions are their own, but compensation and in-depth research determine where and how companies may appear. Many featured companies advertise with us. How we make money.

This story was originally published June 28, 2022 at 1:38 PM.