How to Refinance Your Car Loan for Long-Haul Savings

What's Hot

2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

This Free Software Brings Old Laptops Back to LifeMore

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

21 Restaurants Offering Free Food Right NowSaving Money

7 Dumb and Costly Moves Homebuyers MakeBorrow

House Hunters: Beware of These 6 Mortgage MistakesBorrow

Beware These 12 Common Money MistakesCredit & Debt

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Where to Sell Your Stuff for Top DollarAround The House

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

The True Cost of Bad CreditCredit & Debt

17 Ways to Have More Fun for Less MoneySave

14 Ways to Maximize Your Social Security ChecksGrow

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

10 Companies With the Best 401(k) PlansGrow

8 Ways to Take Control of Your Finances — and Be HappierGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

14 Super Smart Ways to Save on TravelSave

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

The Rich Prefer Modest Cars — Should You Join Them?Cars

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

6 Healthful Treats for Your DogFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

7 Free Sources of Manufacturer Coupons You Can Find OnlineSave

Ask Stacy: How Do I Start Over?Credit & Debt

8 Ways to Get a Good Price on a Shiny New AutoCars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Fixing Your Credit? Do These 5 Things, Avoid These 3Credit & Debt

In spite of recent interest rates hikes, you may still be able to save money by refinancing your car loan. Here's how to do it, while avoiding common potholes.

Refinancing a loan on what may be your single largest purchase, a home, can save you hundreds of dollars a month — thousands over the life of the mortgage. Likewise, it makes sense to check out refinancing your second-largest purchase, your ride.

Interest rates are starting to edge upward from their rock-bottom lows. Still, if you secured your current auto loan through a dealership’s financial office, you may still save big by refinancing through a credit union or other traditional lender.

But there are a few things you need to watch for to avoid potholes on the road to savings.

Get online search for interest rates for auto refinance — not rates for new or used cars.

You can start comparing rates in the car loan section of our Solutions Center. Enter your credit score range, amount of the loan and ZIP code in the car loan tab. Responding lenders will post terms, such as 36 or 50 months, interest rates, expected monthly payments and their contact information.

Compare rates and terms on the websites of your local credit unions and banks. In general, credit unions tend to offer loans at rates lower than banks because members pool their assets to provide loans and other financial services to each other.

And don’t forget to ask your current lender for rates to refinance your auto loan. Many will refinance your loan at a rate below what you’re already paying because they want to keep your business.

Is your credit score a speed bump?

Once you’ve gathered the rates you can secure if you refinance, compare them with your current rate. Perhaps you tuned up your credit score or joined a credit union so you can qualify for a better rate than you did when you bought the car.

If poor credit is preventing you from finding a cheaper loan, you may need to first take steps to improve your credit score.

Even if your credit is sterling, factors beyond your control may negatively impact your refinancing prospects. Lenders consider the state in which you live and even the current auto sales environment when setting loan rates and requirements. And, as noted, interest rates are beginning to climb.

Watch out for potholes

If you find a loan at a favorable rate, that’s a great start, but be sure to read the fine print on all contracts. You need to know if you will pay penalties for paying off either your original loan or your refinancing package early. If so, refinancing may not make sense.

Lenders may have other loan conditions that could leave your refinance decision in the ditch. For example, Bank of America sets a minimum refinance amount of $5,000 ($7,500 in Minnesota and South Carolina) and requires your car be no more than 10 years old and have no more than 125,000 miles on the odometer.

Be sure to consider the overall cost of the loan.

You may be refinancing in order to get lower monthly payments over a longer term. That’s fine, but remember that taking the scenic route will cost you more in interest. Shortening the term of the loan allows you to build equity in your car faster. Even if your monthly payment goes up, and you can afford it, you’ll pay less over the lifetime of the loan.

Either way, refinancing an auto loan should not negatively impact your credit scores, reports CarsDirect. Just make sure you go through a reputable lender so your old loan is satisfied (the new lender pays it off when it issues your loan). Then make full, on-time payments on your new loan.

What’s your experience refinancing a car loan? Have you found it worthwhile? Share with us in comments below or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: Credit Card Debt Is Getting More Costly: 2 Methods for Tackling Yours

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,017 more deals!