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How Often Can You Refinance Your Car Loan?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Refinancing your auto loan can be a wise decision, especially if you do the math and realize you have something to gain. You may find more attractive interest rates, have improved credit, or be struggling to afford your payments and want a way to ease your monthly auto bill. The real issue is whether a new loan and its attendant fees will result in savings during the time it takes to own the car outright.

But what happens if you’ve refinanced before and you’re looking to refinance your auto loan yet again?

How long to wait before refinancing your auto loan

Good news: Consumers can refinance their car as many times as they want and as often as they can find a lender willing to approve them for a new loan.

You can even refinance your car loan the moment you get it home from the dealership if you realize you can land a better loan. There are no legal restrictions on financing a car later on, although it may be harder to find a willing lender as the years and miles accrue on the vehicle. Each lender has its own set of requirements. At Bank of America, for example, the car must be less than 10 years old and have fewer than 125,000 miles on it to qualify for refinancing.

Just because you can refinance doesn’t necessarily mean it’ll be easy.

Look at your original loan contract to see if you have to jump through any hoops first. The Federal Trade Commission (FTC) warns that finance companies and banks can impose “prepayment penalties” on their contracts, which are fees they charge if you decide to pay off your loan earlier than planned. And, of course, by refinancing with a new lender, you are doing exactly that.

According to online auto retailer Cars Direct, prepayment penalties are allowed by the government in the District of Columbia and 36 states.

7 Reasons It Makes Sense to Refinance an Auto Loan

There are many cases in which it might be a good idea to refinance your auto loan.

Perhaps you need a lower monthly payment to offset a tight budget, or you need to save the total amount the car financing will ultimately cost. We’ll break down a few factors that can make it profitable to refinance now.

1. You qualify for a loan with a lower interest rate

Many car shoppers never shop around or compare auto loan offers, and that can be a costly mistake. If you’re in that group, then you may walk off the lot with a terrible rate and realize late that you could have gotten a much better deal. That’s a good reason to refinance.

In another scenario, if interest rates have dropped a few percentage points since the car was originally financed, there’s a chance auto rates might be lower as well. You may save money on refinancing the vehicle. Consumers can search for auto refinancing rates at competitive lending sites like LendingTree, the parent company of MagnifyMoney, which may offer interest rates as low as 1.99% APR on terms of two, three, four and five years. Lenders may offer the best rates to consumers with good-to-excellent credit scores (700-800).

2. You want a lower monthly payment

Even consumers with clear credit histories and top scores may not like the cost of their current monthly payments. You might find that you can get a longer term loan (and, thus, a lower payment) by getting pre-approved financing from a bank, credit union or private lender. You should compare a new loan with the terms and rates of your existing financing. LendingTree’s Auto Refinance Calculator crunches monthly payment figures, allowing buyers to type in different interest rates and loan terms to find the sweet spot.

Just beware of choosing a loan with a longer term. It may save you money on your monthly payment, but you will ultimately pay more interest over time.

Here’s an example to show you how much more you’ll pay with a longer-term loan.

For those who can increase their monthly payment without too much stress, shortening the term may be a good strategy. Monthly payments will be higher, but the car will be paid off sooner, lowering the total amount of paid interest. The bottom line: If you’re considering changing the term in refinancing, be sure the interest rate and refinancing charges are low enough to make it worthwhile.

3. You want to remove or add a co-signer

There may be business or personal reasons to add or remove a co-signer from the original auto financing. In a divorce, the primary owner may want to remove the ex-spouse co-signer from the loan and title. Or someone may want to add a co-borrower with better credit to qualify for a lower refinancing rate. Either way, those modifications are going to require refinancing.

Unfortunately, it’s going to be difficult to remove yourself as a co-signer if the person who financed the car stops making payments. So if that’s your case, check out our guide on how to get out of a bad car loan.

4. Your credit score has improved and you can qualify for a lower rate

Congrats on improving your score! According to our parent company, LendingTree, if you raise your credit into the next tier in the FICO Score range you may see appreciable savings. Auto lenders rank consumer credit into Tiers A, B, C, D and F. Financing to applicants with D- and F-tier scores may only be offered as subprime or bad credit loans:

  • Tier A: 781 – 850
  • Tier B: 661 – 780
  • Tier C: 601 – 660
  • Tier D: 501 – 600
  • Tier F: 300 – 500

Borrowers falling into the D and F tiers should review MagnifyMoney’s guide on bad credit loans.

5. You earn a lot less or a lot more than you used to

There may be two key financial reasons supporting car refinancing:

  • You earn more than you did when you bought the vehicle and want to pay it off sooner
  • You earn less than you did and cannot meet the monthly payments

Those who have improved finances may choose to refinance to shorten the loan term, increasing their monthly payments but slashing the amount of total required payments to pay off the car. Owners who have experienced a financial setback (change or loss of income) can refinance their vehicles to a longer term, lowering the amount of their monthly payments. Refinancing your loan to a lower rate with the same or more favorable interest rate will lower the total cost of the car.

6. Your car is worth less than what you owe

If a consumer owes more money on their car than it’s worth, they have an “upside-down” loan. This can happen if you buy a car with a very low down payment and finance the rest. Your car simply loses value over time and you wind up paying on a loan that was determined based on its value months or even years earlier. If your car loan is underwater, you don’t have a good chance of getting refinanced since the lender will take a hit on the collateral if you default. A way to stave off disaster is to make extra payments on the original loan or take out a home equity or personal loan to pay off the vehicle.

7. Your car is getting older

If you want to refinance before your car gets too old to qualify, you should.

Lenders set their own limits on how many miles and years on the road qualify cars for refinancing. For example, Nationwide Bank will not refinance vehicles that are 20 years or older, or 150,000 miles on the odometer. Bank of America will not refinance cars 10 years or older and won’t touch vehicles with 125,000 miles or more.

Risks To Consider Before You Refinance

Impact on credit

When you apply for refinancing, a “hard inquiry” is reported to the credit agencies. Multiple hard inquiries on refinancing (and other loan requests) can drop credit scores by a few points, but the impact can be offset if you make consistent payments on time, which will help boost your score.

Also, you won’t get dinged if you shop for an auto loan over a short period of time — say two weeks or so. In that case, credit bureaus should treat all those hard inquiries as just one inquiry.

Long-term loans can cost more in the long run

Today, you can get auto loans for as long as 84 months. Extending terms through a refinance may look good when the monthly payment comes due. But the added interest over the term can cost you more in the end. Term and APR sit on opposite sides of the seesaw.

Doing the math, compare these costs when the terms are extended:

  • A $30,000 car financed at 6% for five years: $34,799
  • Financing the same car and rate for seven years: $36,813

If you drag out your loan term, you could wind up upside down on the loan

During the first years of ownership, financing on a new car is already upside down. That’s because the monthly payments are largely paid on interest rather than on the principal. Meanwhile, the new car is losing value. If the consumer has a downward turn in finances, the loan can go off the deep end. With an older vehicle, there’s still a risk with a long extension. By the time the refinancing is paid off, the car will have amassed high mileage that can diminish its use as a trade-in.

Fees

Each state charges a titling fee when a new loan is made on the vehicle. Check your state’s Department of Motor Vehicles (DMV) to find out the fees. In New York, for example, the titling fee is $50. It’s unlawful for the dealership to make a profit on the titling. Remember, frequent refinancing customers pay for titling each time.

There are no requirements or charges for an appraisal when refinancing, but the borrower may be assessed lender fees for loan originations and processing. Get all charges — in writing — in your contract. Some lenders may be open to negotiations on some fees. Be wary of upfront fees that may be charged with any loan application at the bank, credit union or finance company.

How To Compare Auto Refi Offers

Always shop around for the best auto loan deal before you head to the dealership. If you walk in the dealership with an offer in hand, they will have to negotiate with you if they want your business — and they will, because they do.

Here’s what to compare when you’re looking at different loans:

  • Price
  • Down payment requirement
  • Amount financed
  • Annual percentage rate
  • Finance charges
  • Term length in months
  • Number of payments
  • Monthly payment amount

Try comparing loans with the same term to find the best APR. Or view the same APR across multiple terms to see the financial impact on monthly payments. Take your comparative checklist when visiting lenders or bank and credit union websites. Our parent company LendingTree serves up free offers on auto refinancing in a comparative format.

Pre-approvals on a car loan are good from 30 to 90 days, depending on the lender.

What if I can’t get approved for an auto refi?

The first step in responding to a loan denial is to learn why you were turned down. The Equal Credit Opportunity Act requires lenders to notify borrowers in writing the reasons the application was denied. Reasons for denial may involve the credit score or red flags in your credit history. Too many hard credit inquiries might indicate that you’re desperate for a loan. Turn-down letters provide an opportunity to view the credit report that the loan underwriters evaluated.

You may have to wait awhile before applying for refinancing again, since it will result in another ding on your credit. Or, if you’re in the subprime and bad credit tiers, look at options of getting financing from banks, credit unions or financing companies that specialize in loans for Tier D and F categories. Learn more about the subprime options at MagnifyMoney.

Finally, you could take time out from refinancing while you report errors on your credit report and set about improving your credit score. MagnifyMoney has sound advice on building the highest credit scores. Steps include:

  1. Get a line of credit
  2. Keep a low credit utilization rate
  3. Pay your creditors in full and on time with each monthly statement
  4. Avoid or reduce credit card debt
  5. Protect your score

Helpful resources

The following links offer a wealth of financing information that can keep you out of trouble:

Auto Loans

The Consumer Financial Protection Bureau offers answers to frequently asked questions on car financing, including a section on how to avert repossessions.

Auto Loans Modification Scams

The FTC warns about companies that claim to change the loan to avoid repossessions and fines. They may charge significant upfront fees and do nothing on your behalf.

Auto Loans Advice, LendingTree

This collection of LendingTree articles on car loans covers a range of issues, including financing options, bad credit, financing a classic car, bankruptcy, car ownership, certified pre-owned cars, and more.

Credit Repair: How to Help Yourself

The FTC’s Consumer Information division has published an extensive guide to repairing credit, including information on credit report disputes, finding legitimate credit counselors, and consumer rights.

How to Get a Car Loan with Bad Credit

View MagnifyMoney’s comprehensive guide to refinancing bad-credit loans, getting a co-signer, and tips for avoiding financing scams.

National Auto Lending Study

A study by MagnifyMoney and Google Consumer Surveys found that seven-year terms can be a ticket to the horror upside-down loans, especially for subprime borrowers. Read the rest of the findings.

Understanding Vehicle Financing

The American Financial Services Association Education Foundation (AFSAEF), the National Automobile Dealers Association (NADA), and the Federal Trade Commission (FTC) have prepared this 16-page brochure to help consumers understand financing terms, laws regulating dealership financing, and strategies for visiting dealerships.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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Auto Loan, Reviews

Review: Wells Fargo Auto Loan

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Wells Fargo Auto Loan

If it’s time to get a new or used car, it’s time to do your research. Perhaps you’ve picked out the car of your dreams and you want to figure out the best way to pay for it.

When it comes to financing a vehicle, you have a ton of choices. Wells Fargo, founded in 1852, is one of many places to consider getting an auto loan from.

Wells Fargo Auto, a division of Wells Fargo Bank, serves more than 3 million auto loan customers throughout the United States.

About Wells Fargo

Wells Fargo offers new and used vehicle financing through its network of 11,000 active car dealerships, but it’s possible to apply with the bank directly if you’re interested in financing outside of the dealership or refinancing an existing auto loan. You could also use a Wells Fargo personal line of credit or loan to buy a car from a private seller or buy out your leased vehicle, but you may have to pay an annual fee or origination fee. A home equity loan or line of credit is another possibility but puts your home at risk should you default on your car payments.

It’s worth noting that Wells Fargo continues to compensate auto loan customers who were charged for insurance they didn’t need or add-ons after their car loans were repaid or their vehicles repossessed. The bank’s redress program came after a December 2018 settlement with attorneys general from all 50 states calling for $422 million to be repaid to auto loan customers.

Wells Fargo: At a glance

  • Loan terms up to 72months
  • Loan amounts between $5,000and $100,000for new and used auto loans.

Because a majority of Wells Fargo’s loans are through dealerships, what’s known as indirect lending, you may not know your exact rate or terms until you apply through a dealership. A Wells Fargo spokesperson said rates are based on a number of factors, including the borrower’s credit history. While the best rates and terms tend to go to those with the best credit, it’s possible to be approved with less-than-stellar scores at Wells Fargo.

Wells Fargo also offers loans for those looking for specialty vehicles like motorcycles or recreational vehicles. Existing customers may be eligible for a discount if they use autopay to make their vehicle payments from a Wells Fargo consumer checking account.

A closer look at Wells Fargo auto loans

Highlights of Wells Fargo auto loans

  • Multiple ways to pay: You could make your car payment through the bank’s online eServices function, automatic loan payments or at any Wells Fargo branch.
  • APR discount: Wells Fargo offers a 0.25% discount for existing customers who use a consumer checking account to make automatic payments on its car loans.

Lowlights of a Wells Fargo auto loan

  • Mix of direct and indirect loans: While it’s possible to apply directly through Wells Fargo for an auto loan, most of its auto lending is through dealerships.
  • Negative press: In addition to fines Wells Fargo has had to pay in regards to its auto loan customers, it has been fined for the way it treated mortgage customers as well. In all, the bank has agreed to pay billions in settlements and consent orders.

How to apply

As we’ve already mentioned, most customers apply through one of 11,000 dealerships in the Wells Fargo network. But applying outside of the dealership is possible — a Wells Fargo spokesperson said customers may call or visit a branch for more options. It’s possible to apply for a refinance loan online, in person or by calling 800-289-8004. We’ll talk more about refinance loans in more detail, below.

Here’s what the bank will want to know about you and your car:

  • Personal information: Address, contact information, date of birth and Social Security number.
  • Country of citizenship information
  • Marital status (Wisconsin only)
  • Housing information: Whether you rent or own and for how much as well as information about previous recent addresses
  • Income information: Your occupation, gross monthly income and previous employer
  • Information about your car: Year, VIN, mileage and remaining loan balance. You can find out your remaining loan balance by calling your current lender.

The fine print on an auto refinance loan

The only way to make sure you’re getting the best deal on a loan for a new car or to refinance the one you have is to shop around. Make sure a refinance really is in your best interest and that you understand Wells Fargo’s criteria before you sign:

  • Minimum loan amount of $7,500
  • Co-signers allowed
  • Not offered in Alaska, Arkansas, Hawaii, Louisiana, North Dakota or Washington, D.C.
  • May be difficult to get approved if your vehicle has more than 100,000 miles or is 8 years or older.

Once you have applied, Wells Fargo will contact you by phone, mail or email. You’ll have the option of signing and returning the loan package by mail or finishing the process online.

Who is a Wells Fargo auto loan best for?

Wells Fargo auto loans can be a good fit for those in the market for a new or used vehicle, or folks looking to refinance a current loan. It may be the best option for existing Wells Fargo customers looking to refinance — it’s possible to apply directly through the bank, online and, if you’re willing to make auto payments, you may score a lower interest rate.

A Wells Fargo auto loan might be good for anyone shopping for a new or used car as well, but the only way to make sure you’re getting the best rate, particularly if it’s one offered through the dealership, is by comparing it with your preapproval offer from another bank, credit union or online lender.

A Wells Fargo auto loan is not a good fit for anyone interested in a private party auto loan. For those, look to competitors such as Lightstream, Bank of America or a credit union.

Lindsay Martell contributed to this report.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

MagnifyMoney
MagnifyMoney |

Have a question to ask or a story to share? Contact the MagnifyMoney team at [email protected]

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Auto Loan, Reviews

Review: Bank of America Auto Loan

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Bank of America Auto Loan

The history of Bank of America dates back to more than two centuries, but that doesn’t mean its banking services are stuck in the past. In recent years, Bank of America has modernized its service offers by adding mobile auto lending services that allows buyers to choose a car and a car loan in one place. Yes, you can apply for its loans in person at a branch or over the phone, but it’s hard to beat the speed and convenience of applying from home or anywhere you use your smartphone.

According to Bank of America, you could receive a loan decision within 60 seconds of applying, which is about as fast an approval as you can get from any lender, whether in person or online. But don’t be so quick to gloss over the details. While you may get approval decision within a minute, you might not be getting your lowest rates. Bank of America offers competitive rates for new car financing and a discount for certain customers, but other lenders may be able to beat Bank of America when it comes to used car loans and refinancing.

About Bank of America

Bank of America’s online auto buying experience starts when you submit an electronic application through its website where you have the option to use your loan approval to shop for and buy your car through Bank of America’s network of participating dealerships. Once you get your loan approval you can visit the Bank of America website or use the banking app to search a national inventory of more than one million cars, then visit dealerships for test drives and to finish the paperwork.

You can also use a Bank of America loan to buy a vehicle outside of the network. The bank offers loans for:

For specific rates for used and new cars as well as loans you could use to refinance your existing car or to buy out your leased vehicle, see the chart below.

Bank of America: At a glance

  • Loan amounts starting at $7,500
  • Terms between 12 and 60 months

Bank of America offers a wide variety of loans, but its loans aren’t available for specialty vehicles such as motorcycles or RVs. Financing is available to residents of all 50 U.S. states who borrow a minimum of $7,500 ($8,000 in Minnesota), but it can’t be used to buy cars that are over 10 years old or with more than 125,000 miles.

Advertised rates for new car loans are comparatively low, but to find the lowest APR for your loan you’ll need to do some comparison shopping. Rates vary depending on what kind of purchase you’re making, where you shop and the condition of your credit, with the lowest rates available for buyers with excellent credit when they purchase a new car from a dealer. Bank of America advertises much higher rates for private party purchases.

Compare Auto Loans
 New from dealerUsed from dealerUsed from private party*RefinanceLease buyout*
Bank of America3.19%3.39%5.99%3.99%4.19%
Chase4.24%4.24%N/A4.89%N/A
LightStream3.99%3.99%4.99%3.99%4.99%
*Bank of America lease buyout and private party loan rates are current as of Sept. 18, 2019.

If you bank with Bank of America or have an investment account with its wealth management subsidiary, Merrill, you may be eligible for lower rates. Preferred Rewards members get a rate discount at 0.25% for Gold members, 0.35% for Platinum members and 0.50% for Platinum Honors members.

Your eligibility for Preferred Rewards is based on the average asset balances held by Bank of America and/or Merrill over the three months prior to your application, with a minimum average balance requirement of $20,000. You can enroll for free to see if you’re eligible.

A closer look at Bank of America auto loans

Advantages of Bank of America auto loans

  • Loan approval offers lock in your terms for 30 days. That gives you time to shop around and find the car you want.
  • No application or origination fees, unlike some other lenders.
  • No prepayment penalty, meaning you can pay off your loan early and potentially save on interest charges without being penalized.

Disadvantages of Bank of America auto loan

  • Other lenders’ rate discounts may be easier to qualify for than the Preferred Rewards’ discount. PenFed Credit Union, for example, offers a discount to customers who use its car buying service, which can mean new car loan rates as low as 1.49%*.
  • Loan preapproval isn’t available. That means you’ll likely have to take a hard inquiry into your credit, and possibly lose a few points from your credit scores, just to see the loan terms you’re being offered. However, it’s always a good idea to compare auto loan rates and applying to multiple lenders doesn’t hurt your credit any more than it does to apply to one, as long as you do so within a 14-day window.

How to apply for a Bank of America auto loan

Completing an application online is a straightforward process, and if you’re already a bank member you can choose to have some of the application prefilled. Whether you apply online, in person or over the phone by calling 844-892-6002, you’ll need to submit the following information to complete an application:

  • Name
  • Address
  • Social Security number
  • Employment information
  • Income
  • U.S. citizenship status
  • Email address

You may be asked to submit some of the following information to complete your application, if applicable:

  • Purchase agreement/bill of sale
  • Registration
  • Title
  • Vehicle make, model and year
  • Mileage
  • VIN number
  • Lease buyout instructions
  • Proof of income
  • Federal tax returns
  • W-2s

To apply in person, you can make an appointment through the website or walk into a bank branch and talk to a representative. Setting an appointment allows you to avoid waiting and helps ensure a specialist will be prepared with the information you need.

Once you’ve submitted your application, loan decisions are quick. Even if further review is needed after you submit your application, you’ll receive an email with your decision by the end of the following business day.

The fine print

  • Loans are only for cars purchased through franchise dealerships or private parties, which does not include independent dealerships except for CarMax, Hertz Car Sales, Enterprise Car Sales and Carvana.
  • If you apply online, you’ll get the details of your approval via email. Make sure to look them over, including interest rates and repayment terms for new versus used car purchases, before you begin car shopping.
  • Loans are available with payment terms lasting up to 60 months. While a longer term can lower your monthly payment, it can cost a lot more in interest charges. Make sure to do the math before agreeing to a long-term repayment.

Who is a Bank of America auto loan best for?

Savvy car shoppers know that using bank or credit union-backed financing for an auto purchase is generally a better option than going through a dealership. But it can be difficult to arrange bank financing and complete a car purchase without putting in the time to contact several different lenders and visit multiple lots.

If you want the security of financing with a large bank with branches around the country, or even from your pre-existing Bank of America account profile, Bank of America auto loans might be the solution for you. They offer some of the same perks as dealership financing, allowing you to apply for a loan and shop for a car, all within the same platform.

But some extra legwork usually pays off: Comparing rates with other banks, plus credit unions and online lenders is the only way to make sure you’re getting the best deal possible.

*Rate and offer current as of June 1, 2019 and are subject to change. Promotional rate is not available to refinance existing PenFed car loans. Terms apply.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Brady
Sarah Brady |

Sarah Brady is a writer at MagnifyMoney. You can email Sarah here