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Bottom Line Up Front

  • The goal of refinancing is to get a new auto loan with a lower interest rate.
  • Your credit score will impact your rate; higher scores earn lower rates.
  • Consider how changes to your loan term or additional fees will impact your repayment.

Time to Read

3 minutes

August 9, 2022

If your auto loan payments are too high for your current budget—like they are for many Americans—you could save money by refinancing. Read on for tips on refinancing your car loan.

How Interest Rates and Credit Scores Make a Difference

Your interest rate affects how much your car loan payment is each month. When you refinance, you’re aiming to get a new loan with a lower interest rate than what you have for your current loan. 

So how do you get a lower rate? Your credit score is key to determining that—the higher (or better) your credit score, the lower the interest rate you’re likely to get. If your credit has improved since you first got your loan, you’re more likely to qualify for a lower rate when you refinance.

Things to Consider About Refinancing

The biggest benefit of refinancing a car loan is saving money and giving your budget some breathing room. If you can reduce your interest rate, you could save an impressive amount.

However, you need to be cautious. Untrustworthy lenders could try to get you into a more costly loan. They might offer a loan with a much lower monthly payment, but with a 7- or 9-year term to pay it off. With a much longer term, you’d end up paying much more in the long run. Be aware of extra fees as well. Always ask what fees are involved before you apply and double-check your refinancing contract before signing it.

Frequently Asked Questions

How Does Refinancing a Car Work?

Think of refinancing as applying for a new loan. It works similarly to when you originally applied. You’ll fill out an application with the same type of information you submitted for your original loan, such as proof of income along with details of your current loan (e.g., monthly payment, remaining balance) and your car (e.g., make, model, VIN, mileage). Your lender will check your credit and, if you’re approved, will tell you your options for interest rates, terms and payments. Should you accept their approval, your old loan will be paid off, and you’ll start fresh with your new payments.

When Should I Refinance My Car?

You can refinance your auto loan anytime. The sooner you refinance, the more money you’ll save. That being said, if you need to work on your credit, it makes sense to spend a few months trying to improve it. This way, you can qualify for the lowest possible rate.

Can I Refinance a Car if I Don’t Have Great Credit?

Although it may be harder to get approved, refinancing a car loan with less-than-ideal credit isn’t impossible. Sometimes, it’s as easy as finding a creditworthy co-signer. You may also need to wait a bit while you build a higher credit score or show you have a better payment history to prove your eligibility. Asking your lender about your refinancing options will help ensure that you can get a competitive rate.

Get Started With Your Auto Refinance

If you’re considering refinancing your car loan, you could get a lower rate and lower monthly payments by refinancing with Navy Federal. It’s fast and easy to apply online, by calling us at 1-888-842-6328 or by visiting a branch.

Next Steps Next Steps

  1. Check your credit score and determine whether you need time to build better credit. If it’s low, help raise it by making on-time payments and reducing your debt.
  2. Speak with a lender like Navy Federal to discuss auto loan refinancing options. Compare terms from different lenders to determine which offer is best for you.


This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.