Used car loan refinancing can be a good way to lower your monthly car payments, especially if you have improved your credit score since you first took out your car loan.

But what is involved in car loan refinancing?

1. When to Refinance a Used Car Loan?

A common thought is that it makes the most sense to refinance a car loan in the first year or two of the loan. One reason for this is that is when the car depreciates — or loses some of its value — the most.

The first year is also when you are paying more in interest as car loans are “front-loaded” loans, where more interest is paid in the first few years of the loan than in later years.

If you have a high-interest loan, that can mean you are paying much more than you would if you were able to refinance your car loan.

It also makes sense to look into car loan refinancing if you have recently improved your credit score. Even a small jump in your credit score can mean a lower interest rate and big savings on your monthly car payment.

2. How To Refinance Your Car Loan

Much as you did when you got your original loan, start by doing your homework. Go to and search for lenders who specialize in car loan refinancing. There are many who are out there, just waiting for a chance to get your business.
You can also look into used car loan refinancing at your bank or credit union. Since you already have a loan, you can show them your promptness in paying off the loan so far, which should help convince them that you are a good credit risk.

Some lenders are cautious about making used car loans and especially so in used car loan refinancing. Often the creditors will only loan on cars of a certain age or make and model. Some lenders may require a higher interest rate on used car loans than the going market rate. This is OK, as long as the new interest rate on your refinanced car loan is still lower than the rate you are paying now. Even a small drop in the interest rate can equate to a big savings for you.

Also, be sure to check for pre-payment penalties in the original loan. Those fees can wipe out any savings your might get from refinancing your used car loan.

3. Special Requirements for Used Car Loan Refinancing

There are a few requirements unique to used car loan refinancing. For instance, if you have a large balance on your used car loan, you may have to borrow more than what the car is worth. In this case, the lender may require a down payment to make up the difference. You also may find yourself extending the length of the loan to get a monthly payment that works best for your budget. These are not ideal scenarios, so think carefully before agreeing to either.

To find out what is best for you, go to to get the expert advice and quotes you need to make the best deal possible.