5 Best Auto Refinance Loans in 2023

If you’re looking to shrink your car payments or reduce your interest rate, auto refinancing might be the solution for you. With auto refinancing, you pay off your current car loan with a new one from a different lender that offers more favorable terms. 

Auto refinancing can be a great tool for lowering your interest rates or monthly payments, but doing your homework is essential. With the right lender, you could save hundreds or even thousands of dollars over the life of your loan.

1. OpenRoad Lending

OpenRoad Lending specializes in auto refinancing, so they understand the ins and outs of this process. They offer loans with terms of up to 72 months and no payments for up to 60 days for qualified applicants. Their average rates start as low as 2.39%, depending on your creditworthiness and other factors.

2. LendingClub

LendingClub operates a peer-to-peer lending platform, which can make its rates and terms more flexible than traditional lenders. They offer an easy online application process, and their auto refinance loan rates range between 2.99 and 24.99%.

3. Capital One Auto Finance

Capital One offers an easy pre-qualification process that doesn’t ding your credit score. Their refinance options cover a wide range of vehicles, including trucks, SUVs, and many types of cars. The average rate is competitive, with APRs starting as low as 3.09% for qualified buyers.

4. Clearlane 

Clearlane (Powered by Ally Bank) offers many refinance options, including traditional, lease payoff, and cash-back refinancing. They provide online pre-qualification, and their average rates start at around 4.74%, depending on the specifics of your situation.

5. LightStream

LightStream, a division of Truist Bank, offers auto refinance loans with no origination fees or prepayment penalties. They offer a Rate Beat program, where they will beat a qualifying interest rate (conditions apply) provided by another lender by 0.10 percentage points. LightStream’s rates start at 8.24% with their AutoPay option.

Deciding Whether to Refinance

Auto refinancing isn’t for everyone. Here are some scenarios when it might make sense:

• Interest rates have dropped since you took out your original auto finance loan.
• Your credit score has improved, potentially qualifying you for a better rate.
• You’re struggling with high monthly payments and want to extend your loan term to make it more manageable (keep in mind that this could lead to paying more interest over time).

Auto refinancing can be a strategic move to save you money. However, it’s essential to be well-informed and prepared.

Why You Should Compare Lenders

When it comes to auto refinancing, not all lenders are created equal. Every lender has different qualifications, so it’s important to shop around and get multiple quotes to get the best deal.

Interest rates, terms, and eligibility requirements can vary significantly from one lender to another. Shopping around could potentially save you thousands of dollars over the life of your loan.

Not all lenders openly disclose all their fees on their websites, so it’s essential to read the fine print on your loan agreement or ask a representative directly to understand all the costs associated with the loan.

Here are some potential fees with auto refinancing:

• Origination fees: Some lenders charge an origination fee to process a new loan. It’s typically a percentage of the loan amount, but some lenders may charge a flat fee.
• Prepayment penalties: These are fees for paying off your loan early. Not all lenders charge prepayment penalties, but it’s important to check.
• Late payment fees: Lenders can charge a late fee if you don’t make your payments on time. The amount can vary by lender.
• Documentation fees: Some lenders may charge fees for processing paperwork.

To obtain the most accurate and current information, please visit the lenders’ websites directly or contact their customer service.

Tips for Comparing

Consider the following tips to compare auto refinance lenders and navigate the process effectively:

1. Read the Fine Print: Ensure you understand all the terms and conditions before signing anything.
2. Check Customer Reviews: Online reviews can give you an idea of a lender’s customer service and track record.
3. Look Beyond the Interest Rate: While the interest rate is a key factor, pay attention to the fees. Be sure to include any fees when calculating your potential savings from refinancing.
4. Check Your Credit Score: Your credit score plays a significant role in the interest rate you’ll receive. 
5. Shop Around: Don’t settle for the first offer you receive. Take the time to explore several lenders and compare.
6. Consider the Loan Term: Extending your loan term will lower your monthly payments, but you’ll pay more in interest over the life of the loan. On the other hand, a shorter term means higher monthly payments but less interest paid overall.
7. Watch Out for Prepayment Penalties: Some auto loans come with prepayment penalties if you pay off the loan before the end of the term. 
8. Maintain Your Car: Lenders might hesitate to refinance a car in bad shape. Keep your vehicle in good condition to improve your chances of getting approved.
9. Check Your Loan-to-Value Ratio (LTV): Some lenders will not refinance cars if the outstanding loan amount is greater than the value of the vehicle.
10. Be Cautious of Adding Extras: Dealers might offer add-ons like extended warranties or insurance products. These extras can add to your cost, so only choose the ones that make sense for you.

The Goal of Refinancing

The primary goal of refinancing your auto loan is to save money, either by reducing your interest rate, lowering your monthly payments, or both. However, it can also help you adjust your loan term to fit your current financial situation better.

Before deciding to refinance, examining your financial situation and goals is essential. You may also consider consulting with a financial advisor to ensure that refinancing is right for you.