Applying for an auto loan will require a hard credit check, which will temporarily dip your credit score by a few points. However, your first few on-time payments will quickly repair (and improve) your score.
Depends on the lender, but generally speaking, many lenders have a minimum loan amount of $5,000 for refinancing auto loans.
Perhaps the most common pitfall is neglecting to factor in your existing lender’s prepayment penalty. In some cases, lenders charge a percentage of the overall principal as a prepayment penalty, which can be high and negate any financial benefits of refinancing. The second most common pitfall to avoid is forgetting to fully pay off your old loan. Be sure not to miss a payment and suffer a needless ding to your credit score!


If you’re looking to lower your interest rate, change up your monthly payments, or simply think you got a crummy deal the first time around, refinancing your auto loan may be the way to go!

Here’s a recap of the seven steps:

  1. Check your credit score.
  2. Determine whether auto loan refinancing is the right choice.
  3. Gather all the necessary documentation.
  4. Get some early quotes and ballpark figures.
  5. Start applying.
  6. Pay off your old loan.
  7. Set up automatic payments on your new loan.

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About the author

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Chris helps people under 30 prosper - both financially and emotionally. In addition to publishing personal finance advice, Chris speaks on the topics of positive psychology and leadership. For speaking inquiries, check out his CAMPUSPEAK page, connect with him on Instagram, or watch his TEDx talk.