If you decide to refinance your auto loan, you may do so with the same lender or by looking around for a better offer. So, can you refinance a car with the same lender?
Yes, you can refinance your auto loan with the same lender. Many lenders permit borrowers to refinance with them, though some do not. Just keep in mind that if you took out your loan recently or don’t meet your lender’s requirements for refinancing, they might not agree to refinance your loan.
What is Car Loan Refinancing, and How Does It Work?
Car loan refinancing works by exchanging your existing loan for a new loan with different terms, like a lower monthly payment, lower interest rate, or longer repayment period. Similar to getting your initial auto loan, the procedure is similar. Several lenders will send you offers after you submit an application for refinancing. Then you select the offer with the most advantageous terms for your circumstances.
Your current loan will end once you and your lender accept the terms of your new loan. One of two things can lead to this. Your current lender will repay your existing loan if you choose a new lender, who will then choose a new lender. After that, you pay the new lender according to your new loan terms. When you refinance your auto loan with the same lender, they’ll pay off your existing loan and start a new one with you. Read more How Does Refinancing Work on a Car?
Is It Possible to Refinance With the Same Lender?
Depending on your lender, you might be able to refinance a car loan through that same company.
Each lender is distinctive like a snowflake. For instance, it might specify how many payments must be made before you can refinance, mileage limitations, and, of course, guidelines regarding whether they can refinance their own loans.
Checking the lender’s website or giving it a call is the best way to learn whether your current lender will cooperate with you for a refinance.
You might find a better deal elsewhere if you shop around, even though your initial auto lender might be able to offer the best terms on an auto loan refinance.
See also: Can You Buy a Car Without a License?
Reasons to Refinance With the Same Lender
Refinancing your auto loan with the same lender makes sense for a variety of reasons. Your lender is aware of you, has copies of your tax returns on file, and can vouch for your track record of timely payments.
You might be rewarded with a fantastic refinancing offer if you’ve been a great borrower thus far. If you already work with your lender, you may be able to avoid an early payment fee.
Reasons to Refinance With a Different Lender
The main benefit of refinancing with a different lender is that you can comparison shop. It may be advantageous to explore other options because some lenders might provide better terms than your current lender.
The offers you receive from various lenders may also be useful in negotiating a refinancing with your current lender. It might be worthwhile to look around for other refinancing offers before settling on one, even if you prefer to work with your current lender.
When Does It Make Sense to Refinance Your Car Loan?
Refinancing a car is a good idea in two situations: either you can obtain a better (lower-cost) loan or you require a more manageable monthly payment. Of course, it also helps if your current lender does not impose a prepayment penalty.
Refinancing could give you some breathing room if your finances are tight. Through a lower interest rate or by deferring loan repayment for a longer period of time, it might be possible for you to reduce your monthly payments. Just keep in mind that choosing the latter option will result in higher interest payments over the course of the loan, increasing your overall borrowing costs.
Refinancing might be useful if your objective is to get a lower APR. 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 caris greater than your loan balance)
If you have dealer-backed financing, you might also be able to refinance through a bank or credit union to get a more affordable loan.
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Things to Know Before You Refinance
Refinancing your auto loan can have some pretty obvious advantages, whether you go with the same lender or a different one. Having said that, there are some things you should bear in mind as you begin the process in addition to competing for the best rates.
Check Your Credit Ahead of Time
Check your credit scores before applying for a new auto loan. ((Spoiler alert: it’s free.) To start, you might discover a mistake that could lower your ratings and decrease your chances of being approved. Second, you can evaluate your results against industry averages and minimum credit scores.
If your credit is excellent, that’s fantastic. If your scores need improvement, you’ve not only spared yourself the hassle of being rejected, but also shielded your scores from being negatively affected by a hard credit inquiry.
Your Credit Matters, But It’s Not the Only Factor
Credit reports receive a lot of attention in the world of personal finance, particularly when a loan application is involved. Don’t worry, though, if your credit is less than stellar.
Other factors, like your DTI and LTV, are taken into account in addition to those we’ve already mentioned. Your DTI can help make up for lower scores if your monthly debt payments are small in comparison to your income. Likewise, if you’ve taken care of your car and paid off your debt (possibly earlier than expected), your LTV may help your case for a refinance loan.
Have Your Documents Ready to Save Time
Even though paperwork tends to be a dull topic, gathering the required paperwork before applying can help you save time. Even if you decide to stay with the same financial institution, they might require you to resubmit some documents.
Although lenders might differ in terms of what they need to see, here’s a relatively comprehensive list of the information they might request:
- Driver’s license
- Registration
- Insurance card
- Cosigner or co-borrower(if applicable)
- Registration
- Vehicle mileage
- VIN
- Vehicle title
- W2, pay stub, or proof of income
Is It Easier to Refinance With Your Current Lender?
The loan agreement and other documents pertaining to your current loan must be submitted when you apply to refinance your auto loan. That paperwork should already be on file with your current lender if you’re applying for a refinance through them. However, even though it might seem simpler to let your current lender handle this step by themselves, you should still locate and examine that information yourself before you submit a refinance application. In this way, you can check the contract for prepayment fines and your precise payoff sum. To determine whether or not you are receiving a better offer with a refinance, it is also crucial to look at your current interest rate.Even though it might seem simpler to refinance with a lender you already work with, it’s essential to compare rates and make sure your financial objectives are being met. And switching might not be all that difficult if you discover a better offer elsewhere. Most lenders design a simple, efficient application procedure. In conclusion, it might be simpler to obtain a refinancing loan from a lender you are already familiar with. But “easier” doesn’t automatically mean it’s better.
Why You Should Consider Shopping Around for a Refinance Loan?
Did you pick the first car you spotted when you were shopping for a car? Or did you look around and find the best choice? Although it’s not entirely uncommon for drivers to choose the first car they see, most people research their options.
Why not take the identical approach to a new loan? especially because comparison shopping can result in long-term financial savings. You can find the best price and terms by using a marketplace. Here are a few justifications for looking around.
You Can Find the Best Rate
There are variations among lending initiatives. A clean credit history may be preferred by one lender while another lender may place more emphasis on the value of your car. In a similar vein, loan rates can also change. Therefore, there is a good chance that your loan offers will differ if you submit applications to several lenders.
When it comes to avoiding higher interest rates and maximizing savings over the course of the loan, rate shopping can be helpful.
You Could Get Approved for Better Terms
Similarly, not all lending agreements are created equally. Some have stricter rules, like fewer car payment grace periods and early-paying fees.
Nobody intends to miss a payment, but financial difficulties do arise. Additional grace days can help you avoid late payment fees if you are running low on cash and a payment due date is approaching.
Prepayment fees are levied when you pay off your loan earlier than anticipated. Yes, some lenders do penalize borrowers for making early payments. In fact, subprime loan clauses frequently include language like this.
Read about When Can You Refinance a Car Loan?
Frequently Asked Questions
Should I Refinance My Car Loan With the Same Lender If I Have Bad Credit?
You might only have a few options to refinance your car if you have poor credit. Your best bet is to check with your lender and consider shopping around because not all lenders offer auto refinancing for people with bad credit. If you spend the time to raise your credit score before submitting an application for auto refinancing, you may be eligible for lower rates.
What Happens to My Old Loan When I Refinance?
When you refinance, your old loan is replaced by the new one. Your payments will start on the new account after the refinance loan has paid off the original loan.
Do All Lenders Refinance Their Loans?
Some lenders refuse to refinance their own debt. Check the details on your lender’s website or give them a call to see if they provide this option.
Should You Refinance With the Same Lender?
There is a good chance that you can refinance with the same lender if you want to. Perhaps you received excellent customer service, or perhaps it was an online lender with a user-friendly digital interface. However, these justifications by themselves do not support refinancing with the same lender.
First off, it’s possible that your current lender doesn’t offer refinancing for auto loans. Your dealership’s lending program, which might not offer refinance loans, was what you ultimately chose to use to finance your initial car purchase.
Even more importantly, it’s generally a good idea to compare and shop around among lenders. You consequently raise your chances of receiving the best terms and a lower interest rate.
