Should I refinance my car?

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Many things can change over the course of an auto loan to make refinancing worth considering. A lot of times, borrowers want to save on their financing costs or find a more affordable payment, but they may also want to get cash out against the value of their vehicle, or change their loan for other reasons.

Take a look at these common situations in which it can be worth replacing an auto loan with another that has new terms.


4 common situations for refinancing a car loan

Your credit score has improved

In most cases, credit score has a large impact on the interest rate attached to an auto loan, so if your score has improved, you may be able to bag a better rate. With a reduced interest rate and APR, refinancing a loan for the same or a shorter duration than remains on the current note can lead to savings.


Market rates have dropped

Like credit scores, market interest rates go up and down over time. A fall in auto rates could provide an opportunity to take advantage and apply for a lower rate on your own loan.


You need to remove a cosigner

Some consumers, such as those with bad or no credit histories,* will apply for an auto loan with a cosigner to help them qualify or improve their terms. However, there may come a time when one or both parties would like to untie their finances. The borrower’s credit score may have improved, for instance, or the cosigner no longer wishes to carry the risk associated with the loan. In these cases, refinancing can be a simple solution.


You need a cash lump sum

A cash-back refinance offers qualified applicants the chance to tap into the value of their vehicle to access a lump sum payment. Online lender RoadLoans enables cash-back customers to get up to $5,000, for example.† Such a sum could be used for the likes of a home improvement, big-ticket purchase or to consolidate high-interest debt.


How to find out if refinancing makes sense

Follow a few steps to work out if refinancing suits your position.


Get your payoff amount

First of all, call your lender or log into your account to get the payoff on your current loan – the amount to be refinanced. Check to see if there’s a penalty fee for paying off your loan early, too. You’ll need these details to run the numbers on a refinanced loan and to apply, later.


Check for negative equity

Next, look up the value of your car at sites such as, and compare it to the payoff. If your vehicle is worth less than the outstanding balance on your loan, refinancing may not be an option.


Calculate potential car-payment and interest savings

Use RoadLoans’ auto refinance calculator to gauge how new terms could affect your loan costs. Enter the loan balance, monthly payment and APR on your current loan, then add the refinance amount, loan term and APR for a potential new loan. Having done that, the calculator will display the estimated new auto payment and total interest payment, along with any savings or increase.

Here’s an example. You took out a loan for $19,500, with an APR of 7 percent and a monthly payment of $386, to be paid over 60 months. You’re now 12 months into the contract and the balance stands at $16,125. By refinancing that sum with an APR of 3.5 percent and a term of 48 months, the calculator estimates a new monthly payment of $360 – a saving of $26 per month. It also shows significant savings in the long run. While you would have paid $2,409 over the remainder of your current contract, the new interest charge is $1,179, a saving of $1,230.

By adjusting the APR and loan duration you will see how monthly payment and interest charges are affected. For instance, total savings from a lower interest rate will be reduced or canceled out when the loan term is extended. On the other hand, if you’re simply looking for a more affordable car payment to balance your budget, a longer loan could achieve it.

This is also a good time to compare potential savings to any prepayment penalty on your current loan. If the penalty fee exceeds the saving, you may not want to refinance.


Apply for a refinanced loan

When you’re ready, it takes just a few minutes to apply for auto refinancing with RoadLoans. Select the refinance option within our online application, enter a few essential details and click to apply securely. You’ll receive a decision in seconds telling you whether you’ve been approved and, if it’s a yes, the terms of the offer. Review the details and, if they meet your needs, complete the forms and return them to us. We’ll handle the rest so you can sit back and look forward to those new terms. † †


* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press),,, Investopedia, and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by and Santander Consumer USA.

 † View disclosures and offer information.

† † RoadLoans does not accept applications to refinance loans from existing Santander Consumer USA and Chrysler Capital customers.


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