The 7 Best Auto Loan Refinance Banks of 2020
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If you're unsatisfied with your car loan interest rate, duration, or monthly payment, then refinancing your auto loan is an option to consider. Just keep in mind that, like any financial decision, you shouldn't make it lightly. The top factors most lenders consider when looking to refinance your vehicle include the condition of your vehicle, the size of your loan, your credit score, your current interest rate, and the length of your loan. Find out your credit score first in order to estimate what interest rate you will be eligible to qualify for. Also be sure to pay attention to whether or not the lender is doing a hard pull on your credit or not as it can impact your credit score for future financing. All that in mind, read on for the best banks to refinance your auto loans at now.
Best Auto Loan Refinance Banks of 2020
If you have very good credit, you should take full advantage of it. Whether you've had it for years or it’s the product of a lot of hard work and dedication to paying off your debts and increasing your income now is the time to go out and secure a lower interest rate on your car loan. LightStream is a division of SunTrust bank that caters to consumers with good to excellent credit — LightStream requires a minimum 660 FICO. They perform a hard pull on your credit when you apply, so you should be prepared actually to make a decision when you do so. Hard inquiries can cause your credit score to fall slightly, which typically isn't a big deal, assuming you apply for new credit sparingly. LightStream's APR starts at just 3.49% (with the autopay discount), and refinanced auto loans are available in all 50 states.
By filling out Capital One’s easy questionnaire, you can see whether you’ll qualify to refinance your loan without impacting your credit score in the slightest. You will need to owe a bit more than some of the other loan refinancing options on this list — at least $7,500 — but you'll be able to see what sort of rates you’d get and pre-qualify without a hard credit check impacting your credit score. Once you pre-qualify, you submit your credit application which involves selecting the length of the loan and the corresponding APR. This will get posted to your consumer credit report. You'll finalize the deal by providing your VIN, E-Sign your contract, provide your lender details, and send in supporting documents such as proof of insurance. Capital One does not charge an application fee, however, each state charges a variable title transfer fee. Capital One will pay the fee and add it into your final loan amount, so you don't have to pay out of pocket at the time of refinancing.
If you opt for an auto loan refinance from Bank of America, you get a trusted financial institution — and a decision in less time than it takes you to tie your shoes. There’s no fee to apply, and you can help yourself to all of their helpful online tools once you are a member of the Bank of America family. To qualify, your car will need to be fewer than ten years old and have less than 125,000 miles on it, and you will also need to have $5,000 or more remaining on your loan. Bank of America's current APR for refinancing a vehicle is 4.13%. It is smart to pay off your existing loan with proceeds from a new loan to take advantage of lower monthly payments, lower interest rates, or save on financing costs. Compare prices and use a car loan calculator to help determine the savings.
Want to learn more? Check out our full review of Bank of America.
AutoPay specializes in auto loan refinancing, so it’s no wonder they offer great deals for many individuals. They often cater to clients who have improved their credit score in the time since they took out their original auto loan, and because of this, they are usually able to offer steeply discounted loans. On their site, you can compare offers for loans from many different lenders without having to fill out more than one application. They also pull your credit with a soft check, which is easy on your credit score and a great option if you are not seriously considering refinancing your loan right this second (once you pick a final offer, they do run a hard pull — but not until you are ready to commit). AutoPay makes it easy to shop around and often partners with credit unions. The lowest rate offered by AutoPay is 1.99% but this is only available if you have a top-tier credit score. The average credit score of an AutoPay customer is 706 which receives, on average, a 5.49% interest loan. Knowing your credit score ahead of time makes a big difference in estimating what your APR will be on refinancing a car loan.
USAA only works with members of the military and their families, but for those who serve our country, this nearly 100-year-old organization offers rates and customer service that is often hard to beat. You won’t have to pay for up to 60 days after you start the loan, giving you time to catch up if you are behind. You can also choose from many of their vehicle protection plans if that’s something you’d like to add on as well. USAA offers to refinance for up to 60 months, and longer terms are also available. USAA takes the hassle out of refinancing by working directly with your lender. Their rates are stated on their website as being as low as 3.04% APR which is noted as including a discount of .25% for automatic payments. Rates are subject to change without notice and vary based on approved credit and other factors, such as term, model year, and loan amount.
Peer-to-peer lending is a non-traditional option, but it is a great one for those who love the idea of working directly with an individual lender for a fixed period. Once you apply, you can often choose between two options and select the one that’s most palatable to you. Keep in mind that LendingClub is not a great option for those who don’t owe very much on their existing vehicle loan: their loans go all the way up to $100,000, but they won’t lend you less than $5,000 for this purpose. They do offer loans to borrowers whose credit score is as low as 510, though of course, you will pay handsomely for the privilege. Many borrowers choose LendingClub because of their low interest rates and less hassle than traditional financing options. They offer a friendly service, and no hidden fees or prepayment penalties.
Like all credit unions, you will need to be a member of Consumers Credit Union for their auto loan refinancing services to be a viable option. However, once you become a member, the perks are soon evident. Unlike many financial institutions, their loan terms are incredibly flexible, especially if you don’t need to borrow a ton of money: they will lend you as little as $250 for as few as six months at a time. They will perform a hard pull on your credit, so make sure you’re serious about refinancing before you see what rate they will give you because your credit might suffer otherwise. But once they do check your credit, they will work with you as long as your score is above 640. Current APR for refinancing is as low as 2.49% to 4.49% based on the length of your loan and your credit history.
How Does an Auto Loan Refinance Work?
An auto loan refinance is when you replace your current auto loan with a new one, intending to receive a lower interest rate. Your new loan will pay off the old loan, and you will sign new paperwork, have new terms and conditions, and a new interest rate.
You typically choose to refinance your auto loan if you’re unhappy with the rate or terms, or your credit score has gone up significantly since your original loan. Usually, refinancing is to save money, but keep an eye out for refinancing fees.
What Are the Requirements to Refinance an Auto Loan?
Different lenders have different requirements to refinance an auto loan, but most require that you:
- Wait at least 60–90 days after the original loan so the title on your vehicle has been transferred
- Meet a minimum credit score set by the lender (typically 660 or higher)
- Show proof of income and identification documents
- Have a car under a certain number of miles (some lenders require under 125,000 miles and under 10 years old)
How Much Does it Cost to Refinance an Auto Loan?
Just like each auto lender has different criteria for refinancing an auto loan, they also have different refinance fees. Some auto lenders charge processing and origination fees to do the refinance paperwork, and you may have to pay a prepayment penalty from your original lender. However, other lenders don’t charge any fees, so you will want to find this out ahead of time.
How We Chose the Best Auto Loan Refinance Banks
We chose the 7 best auto loan refinance banks by first reviewing and researching multiple auto loan refinance banks and then selecting the top contenders. We chose the best options based on credit score requirements, company reputation, available options, rates offered, and more.