How Soon Can You Refinance a Car? Refinancing a car loan is possible once the vehicle title has been transferred to your name. This process usually takes between 60 and 90 days after purchase. Once the title is in your name, you are free to begin exploring refinancing options.
Even though you can refinance as soon as you officially own the car, many people choose to wait six months to a year. Waiting can give your credit score time to improve and may increase your chances of qualifying for a lower interest rate.
When Can You Refinance Your Car Loan?
If you’ve recently purchased a car, you might be wondering how soon you can refinance your loan to get a better interest rate or reduce your monthly payment. Technically, you can refinance as soon as you find a lender willing to approve your application.
Many lenders do not set a required waiting period after a car purchase. However, refinancing cannot begin until your current lender receives the vehicle title from the manufacturer or previous owner, which may take several weeks or months. Some lenders also require the loan to be active for at least six months before considering a refinance request. Depending on your situation, waiting could be beneficial.
Best Times to Refinance Your Car Loan
Timing matters when it comes to refinancing your car loan. While you can technically refinance as soon as your car title is in your name, choosing the right moment can help you secure better rates, lower your monthly payments, or reduce the total interest you’ll pay. Below are the best times to consider refinancing and why each one could work in your favor. Here are helpful points to guide your decision on when to refinance.
Within the first 60 to 90 days of your loan
In the first two to three months, the title of the vehicle is usually still in the process of being transferred. Until the transfer is complete, most lenders will not process a refinance application. However, this early period can be a good time to pre-qualify with multiple lenders and compare rates.
Also, your initial loan application likely involved a hard inquiry on your credit report, which may have caused a temporary dip in your credit score. If your score has not yet recovered and is below 690, waiting might help you qualify for a better rate later.
Six months after starting your loan
By the six-month mark, your credit score may have recovered from any short-term drop caused by the original loan inquiry. If your goal is to secure a lower rate or monthly payment, this could be a better time to apply, especially if your credit has improved.
If this is your first auto loan or you have a limited or challenged credit history, waiting closer to a year might work better. A longer stretch of on-time payments can show lenders that you are a reliable borrower. In fact, some lenders look for at least six to twelve months of consistent payments before accepting a refinance application.
With two years or more remaining on your loan
To make the most of refinancing, it is ideal to have at least two years left on your current loan. Because most of the interest is paid earlier in the loan term, refinancing too late may not lead to significant savings.
Also, different lenders have various criteria for refinancing. These may include how much time is left on your current loan, the remaining loan balance, the age of your vehicle, and the number of miles on it. Make sure to check with potential lenders to understand their specific requirements.
Is Refinancing Right for You?
No matter when you choose to refinance, it is important to apply with several lenders to compare offers. This will help you make a more informed decision about whether refinancing makes sense. You can also use an auto loan refinance calculator to compare new offers with your existing loan.
Refinancing may be a good idea if:
- Your credit score has improved since taking your original loan.
- Interest rates have dropped since your loan began.
- You accepted a high-rate loan from a dealership and could qualify for better terms elsewhere.
- You are struggling with monthly payments and need to reduce them. Extending your loan term may lower your monthly cost, though it could increase the total interest paid over time.
Factors to Consider Before Refinancing
Refinancing can help you lower your interest rate or monthly payments, but it’s important to weigh a few key factors first:
- Loan Term: Think about how the loan length will affect your finances. Extending the loan term might reduce your monthly payments but increase the total interest paid over time. On the other hand, refinancing to a shorter term could lower your overall cost if the rate is better.
- Interest Rates: Check the current market rates. If today’s rates are lower than when you first got your loan, refinancing could save you money provided you qualify for the lower rate.
- Credit Score: Look at your current credit score. If it has improved since your original loan, you’re more likely to qualify for a better refinancing rate. If your score has gone down, you may not benefit as much. You can check your credit score for free through many banks, credit card providers, or trusted online platforms.
- Financial Health: Evaluate your overall financial picture. A stronger credit score and a better debt-to-income ratio can improve your chances of securing a more favorable loan.
