How to Refinance a Car Loan, Step by Step

Refinancing a car loan is mostly paperwork, but the order you do things in matters. Shop with soft credit checks first, submit one full application only when you have picked an offer, and keep paying your old loan until it is paid off. Here is the process from start to finish.

Step 1: Know your starting point

Before you look at any offers, gather the facts about your current loan:

• Your current rate and remaining term. These are on your loan statement or your lender's website.
• Your payoff amount. Ask your lender for a payoff quote. It is usually a little different from the balance on your statement because interest accrues daily.
• Your remaining payments. Multiply your monthly payment by the number of payments left. This is what keeping the loan will cost you.
• Any prepayment penalty. Most auto loans do not have one, but check your contract.

This gives you a baseline. Any refinance offer has to beat it on total cost, not just on the monthly payment.

Step 2: Check your credit

Pull your credit reports and check your score. Look for errors such as accounts that are not yours or late payments that were actually on time, and dispute them with the bureau before you apply. If your score has improved since you got the loan, you have a good reason to shop. If it has dropped, consider waiting.

Step 3: Check your car's value and eligibility

Lenders care about the car as well as you. Look up an estimate of your car's current value and compare it with your payoff amount. If you owe much more than the car is worth, many lenders will not refinance.

Then check each company's vehicle and borrower rules. Some publish them clearly. OpenRoad Lending's FAQ lists vehicle age, mileage, payoff and income limits and excluded vehicle types. RefiJet publishes a minimum credit score, minimum income and loan amount range. Auto Approve lists which vehicle types it refinances. If you do not meet a company's published rules, you can skip it and avoid an unnecessary inquiry.

Step 4: Gather your documents

Having these ready speeds things up:

• Driver's license or other government ID
• Proof of income, such as recent pay stubs or tax returns if you are self-employed
• Proof of residence
• Proof of insurance
• Vehicle details: year, make, model, VIN and current mileage
• Current loan details: lender name, account number and payoff quote
• Registration and, if your state requires it, title information

Step 5: Compare offers with soft checks first

This is the step where your credit is most at risk, so take it carefully. Companies differ on how they check your credit:

• Soft inquiry first. RateGenius's credit check FAQ says it uses a soft inquiry to prequalify you and a hard inquiry when you submit an application. Auto Approve's FAQ says its quotes use a soft inquiry and a hard inquiry happens only if you move forward. myAutoloan says its own check is a soft inquiry, but lenders that review your request may run soft or hard inquiries.
• Hard inquiry from the start. Gravity Lending's FAQ says it pulls your credit with a hard inquiry.
• Not stated. Some companies do not say on their public pages which type of check they use. Ask before you share your details.

Start with two or three companies that use a soft check. Marketplaces such as myAutoloan and LendingTree can show several lenders at once, while refinance platforms such as RateGenius and RefiJet work with networks of partner lenders. You can also check with your own bank or a local credit union.

Credit scoring models usually treat several auto loan inquiries within a short window as a single inquiry, so if hard inquiries do happen, keep your shopping close together.

Step 6: Compare offers on total cost

Line up your offers and compare:

• APR, which reflects the interest rate and certain fees
• Term in months
• Monthly payment
• Total of all payments over the term
• Fees, such as documentation, administrative and title transfer fees
• Add-ons included in the quote, such as GAP or a service contract

The best offer is the one with the lowest total cost that you can comfortably afford each month. If one offer has a much lower payment only because the term is longer, it may cost you more overall. Our guide to auto refinance fees and add-ons explains which costs to look for.

Step 7: Submit one full application

Once you have chosen an offer, submit the full application with that company. This usually triggers a hard inquiry. The lender verifies your income, identity, insurance and vehicle details, and may ask for more documents. Respond quickly to keep things moving.

Read the final loan agreement before you sign. Check that the rate, term, payment and fees match what you were quoted, and that no add-ons have been included that you did not ask for. If something is different, ask why before you sign.

Step 8: Close the loan and transfer the title

After you sign, the new lender pays off your old loan. The title is then updated to show the new lender as lienholder. Depending on your state, this may involve paperwork from you, a title transfer fee and some waiting. Many refinance companies, such as RateGenius, offer guidance on the title process.

Step 9: Keep paying until the old loan is closed

Do not stop paying your old loan just because you have signed the new one. Payoffs can take time. Keep making payments until your old lender confirms the loan is paid in full. If you overpay, the old lender should refund the difference.

Some companies offer a deferred first payment on the new loan. That can give you breathing room, but interest usually keeps accruing, so check what it costs.

Step 10: Set up the new loan

Once the new loan is active:

• Set up autopay or reminders so you never miss a payment.
• Update your insurance policy with the new lienholder if your insurer requires it.
• Confirm the old loan shows as paid and closed on your credit report.
• Keep copies of your new loan agreement and payoff confirmation.

Common mistakes to avoid

• Applying everywhere at once with hard inquiries instead of starting with soft checks.
• Focusing only on the monthly payment and ignoring a longer term.
• Accepting add-ons by default without checking their cost or whether you need them.
• Stopping payments on the old loan before the payoff is confirmed.
• Ignoring fees that are rolled into the new loan.

Where to start

See our auto refinance rankings to compare companies on credit checks, fees, lender access and eligibility, or read when refinancing a car loan makes sense if you are still deciding. If you are weighing two companies, our head-to-head pages compare RateGenius vs AUTOPAY, RefiJet vs Auto Approve and myAutoloan vs LendingTree.