This guide will discuss different factors affecting whether your car is eligible for refinancing. It also touches on what happens if your car does qualify, so you'll know what to expect from the process before you apply.

What is Refinancing?

Refinancing refers to borrowing money to pay off existing debt, such as a mortgage or auto loan. In other words, you're using one type of loan to pay off another type of loan.

What Do I Need to Know About My Current Car Loan?

Refinancing your car loan is essentially like taking out a new loan on your current car, so you'll need to consider what factors affect whether or not you can refinance your current loan. First and foremost, you want to know how much money you owe on your current loan and how long it has left until it expires. You will also want to know if there are any prepayment penalties associated with paying off your loan early.

What Are My Options for Refinancing?

First, use a refinance auto loan calculator or check with your current lender to see if they'll give you a better rate. You might be surprised at how much money you can save by asking. This is especially true if you have been a good customer and have paid on time or early every month.

According to Lantern by SoFi, you can use the calculator to know the exact repayment left and the difference in the interest rates of your old and new loans. 

When Should I Apply for Refinancing?

While some factors like your interest rate and payment length will affect your eligibility to refinance, you'll need to evaluate a few other things. See if any of these situations apply to you:

1. You want to lower your monthly payments
2. You want to lower your interest rate
3. You want to get rid of private mortgage insurance
4. You have equity in your home
5. You plan on moving within two years

The most crucial factor in determining if you're eligible to refinance your car is your credit score. According to Lantern by SoFi, "Lenders will look at your FICO score, ranging from 300 to 850."

How Do I Start the Process of Applying to Refinance My Car?

The first step in applying to refinance your car is to check and see if you are eligible. Many people assume that they are not eligible when they are.

Should I Refinance With My Current Lender Or Switch Lenders?

You'll have to decide if you want to stay with your current lender or switch to a new one. Many factors go into deciding which lender is best for you. Including:

• Is your current lender offering a competitive interest rate?
• Is your current lender offering a good deal on fees?
• Do you have to put down a lot of money upfront when refinancing with your current lender?
• Do you have a good relationship with your current lender?
• Do you like how easy it is to communicate with your current lender?
• How long will it take to refinance with your current lender?

Interest rates and fees are significant factors in determining whether or not you should refinance with your current lender. But they aren't everything.

Can I Get a Lower Interest Rate if I Have a Poor Credit Score?

In most cases, no. Banks look at your FICO score before deciding whether to approve you for a refinance. With a poor credit score, your chances of refinancing are slim to none.

Will Refinancing Hurt My Credit Score?

One of the primary factors to consider when refinancing a car loan is its effect on your credit score. Many things can hurt your credit, but refinancing a car loan shouldn't be one of them.

Conclusion

Just because you're not eligible for a loan doesn't mean you can't refinance your vehicle. Look into improving your credit score, which will make it easier to get approved in future financing attempts.