Car loans aren’t the most entertaining topic to talk about, but they’re a part of life for millions of Americans. Interest rates have risen in recent months, but many people may still want to refinance their cars or take out new loans. A question that comes up many times is whether a person can refinance their auto loan with the same lender. There are so many banks and other institutions that people want to stick with what they know when they find a lender they like. We’ve covered all your questions and more in this guide, so let’s dive in to look at refinancing car loans with the same lender.

Can I refinance your car with the same lender?

In most cases, the answer is yes. There will always be exceptions, but most lenders are okay with borrowers refinancing, as it retains them as customers and continues the interest income from your monthly payments. The same rules apply regardless of where you finance, so you’ll still need to have your credit in order and go through the application process – though it might be abbreviated.

That said, your lender may refuse to refinance your car if your credit score has fallen or your vehicle’s condition exceeds its lending policy. Some banks won’t issue loans on cars with negative equity, so if you owe more than the vehicle is worth, you might have to pay to cover the difference between the two.

Benefits of refinancing with the same lender

Refinancing with the same lender brings many benefits, including time savings and convenience. It takes less time for the loan funding and finalization process when the deal is done in-house with an existing lender, and in some cases, you may be able to take advantage of promotional rates or financing offers. Since the institution already has your current information on file, the application process will likely be simpler, but you’ll still have to make sure everything is complete and correct.

Is refinancing with the same lender the best choice?

Refinancing your car with the same lender can be a good choice if you get the best rates and are satisfied with the quality of service you receive. A quicker, easier application process is appealing, but the shine of that experience can fade quickly if you pay more than you need to in interest and fees. That said, you may choose to remain with your lender even if they don’t have the best rates because of good service or other benefits that make it worth paying a little extra. Sometimes it pays just to be comfortable with your lender.

You should still shop around, even if you plan to return to the same lender. It’s a good idea to find out other banks’ rates and benefits, and you may find that another lender offers all the things you love about your current bank at a better rate.

What is refinancing?

When you have a car loan, you can sometimes refinance that loan to obtain a better interest rate, lower payments, or change lenders. Though it sounds complicated, the basic concept behind refinancing is exchanging your current loan for a new auto loan. If your refinancing application is approved, your new or existing lender will pay off the loan and issue a new loan. Your loan agreement and terms will change even if you don’t change lenders in the process. 

When it makes sense to refinance

You need a lower monthly payment

Your financial situation can change, making it more challenging to afford the car payments you could easily make at first. If you’ve been paying for the car for a while, you’ll likely have accrued some equity, which means you can refinance the car for what you currently owe. Refinancing can lower your monthly payments, but you may extend the loan term in the process, so be aware of what you’re signing up for. Just like refinancing a house, vehicle owners can lower their monthly payments by refinancing, but it may come with an extension of the loan term.

This can also apply if your credit wasn’t the best when you applied for the loan. If you now have a cosigner or your credit has improved, your interest rate can drop significantly by refinancing. Even if your credit still isn’t the best, a cosigner with better credit can help get your interest rate under control.

Interest rates have changed

We hear quite a bit about interest rates in 2023, as banks collapse and the Federal Reserve raises rates to combat inflation. If rates have fallen since you received the loan, exploring your refinancing options might be a good idea. Even a few points of extra interest can cost you hundreds or thousands of dollars over the course of the loan, so it’s best to save the money when you can.

What you need to refinance

Refinancing is generally easier than getting a standard car loan, but you’ll still need to make sure you’ve got all your ducks in a row before heading to the bank. Here’s what you will need to bring with you when refinancing:

• Personal documents – Bring your driver’s license and income verification documents, such as a recent pay stub. You may also need your social security card if you don’t know your number by heart.
• Vehicle information – This includes the registration, proof of insurance, and proof of ownership.
• Information on your current loan – This is less important if you’re refinancing with the same lender, as they’ll usually be able to view your loan information.

Even if you’re confident that your credit is in good shape, it’s also a good idea to review your credit report for inaccuracies and to make sure your score is what you think. Knowing your credit situation ahead of time can also help you negotiate the best rates and loan terms, and can prevent you from overspending on your next car purchase.

How negative equity affects the car loan process

Negative equity is when a vehicle owner owes more for their car than it’s worth. You’ll sometimes hear this called being “upside down” or “underwater” on a car loan. This can happen for several reasons, including having an extended loan term with a high interest rate, excessive driving or wear and tear, maintenance problems, and more. The best-case scenario for owners in this situation is to hold onto the vehicle for as long as possible to pay the loan balance. Of course, this is only a good option if the car is still running and working correctly.

Lenders balk at car loans on vehicles with negative equity because of the risk involved. If you owe thousands more than the car is worth and can’t make the payments, the lender is on the hook for the difference between the amount it can sell the vehicle for and the amount you still owe. 

Car refinancing frequently asked questions

How many times can you refinance a car?

There’s no set limit to how many times you can refinance, but you’ll eventually run out of lenders willing to do the deal. This is especially true if your car is aging, has issues, or your credit starts declining over time.

How long should you wait to refinance a car?

It’s best to wait six months to a year after your purchase to refinance. Applying for too many loans in a short period can hurt your credit, and you might not get the interest rate or terms you hoped for.

What credit score do you need to refinance a car loan?

Though there is no set minimum credit score, having a better credit score will get you a better rate. Lenders view your score as a measure of how risky you’ll be as a borrower, so having a poor credit score could lead to higher interest rates and less favorable loan terms.

Can I refinance a car lease?

Car leases and loans are not the same, so there’s no direct translation between the two. However, if you’re leasing a vehicle and want to purchase it, you can get a loan to pay off the lease amount and finance the car.