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  • Nicholas Hinrichsen

Best Auto Loan Refinancing Lenders of 2020

Updated: 5 days ago

NerdWallet released a list of the 10 Best Auto Loan Refinancing Lenders of July 2020 and updated the list in September. Money.com quickly followed with an article about The Best Auto Refinance Companies of 2020. So did LendingTree, Investopedia and The Balance.


These lists unfortunately are missing a number of auto loan refinance companies worth mentioning. Moreover, the lists confuse Lenders, Refinance Brokers and Affiliate Websites.


You can find below an exhaustive list of all the companies that help with:

  • auto loan refinancing ,

  • adjusting loan terms,

  • lower interest rates,

  • or lease buyouts.

We will explain in depth how each of these companies work and what you as a consumer should do to find competitive auto finance rates, lower your auto loan payment and put thousands of dollars in your savings account. If you're looking for the best auto loan rates, you came to the right place!


Table of contents

  1. Who qualifies for refinancing?

  2. Auto refinance calculator

  3. Which is the best lender to refinance with?

  4. Comparison of the best auto loan refinancing websites

  5. Lenders for car loan refinance

  6. Refinance Brokers for car loan refinance

  7. Affiliate Websites for car loan refinance

  8. The easy process to refinance your auto loan online now

  9. What are auto refinancing rates today?

  10. How does auto loan refinancing work?

  11. When should you refinance your car loan?

  12. Am I likely to qualify for refinancing at a lower interest rate?

  13. Is refinancing your auto loan worth it?

  14. Does refinancing a car loan hurt credit?

  15. Can I refinance if I’m upside-down on my car loan?

  16. Frequently asked questions about refinancing

Who qualifies for refinancing?


100,000,000 Americans have a car loan and more than 20% of car owners are overpaying on their auto loan rate. In 2019, more than 47% of all funded mortgage applications were refinancings. Meanwhile, barely 5% of all funded auto loans were refinances.

  • On the one hand, Americans simply don’t know that they can refinance their auto loans and save thousands of dollars to get the most out of their monthly income.

  • On the other hand, the process of refinancing your used car loan with any of the companies below is far from fast and easy: the process is usually inconvenient, requires a handful of phone calls and emails and you only find out what your total savings are once you’ve gone through the cumbersome process.


In sum, everyone with an existing loan will qualify for refinancing and lower monthly payments at some point in time. You don't have to wait for lower rates to refinance. Instead, make your payments in full and on time to migrate your credit score and qualify for a lower APR (annual percentage rate), already a few months after you bought your vehicle.


WithClutch.com is the only digital platform that allows you to refinance your loan easily, quickly and hassle-free from the comfort of your home. Thanks to our network of lenders, we are your one-stop-shop with the lowest rates and payments. Get an online preapproval now.



Auto refinance calculator


We built a calculator that estimates your monthly payments after a successful refinance. The auto loan refinance calculator gives you two options:

  1. Pick your Year / Make / Model and estimate your monthly payments for your exact vehicle model year (i.e. your trim, drivetrain, engine, mileage, down payment and credit score).

  2. Enter your Credit Score and existing loan balance to estimate your monthly payments for any loan term so you can optimize the original loan based on your budget.


The following chart shows an example of a $30,800 loan refinanced after 2.5 years:

After the refinancing, the calculator shows that the monthly payments went down from $733 to $375 on your new auto loan. The gray line is the vehicle value, the purple line is the first loan and the pink line is the refinanced loan. The yellow bar shows how the principal is being paid off over time and the red bar show the interest payment.


Better even than the estimates from our refinance auto loan calculator would be to enter your exact and accurate data in our digital refinance platform. All we need to determine eligibility for refinance is your phone number, your consent and three simple clicks and we provide you a firm credit offer in less than 2 minutes.


We can conveniently pull up your personal details, your credit file with your existing loans and your motor vehicle records. Through matching your credit file to the vehicles registered in your name, we can get you a much more accurate offer than any calculator estimate.


We won't store your data or impact your credit so there's nothing to worry about.



Which is the best lender to refinance with?


It’s important to understand the differences between the business models of the companies below:

  • Lenders: Banks and Credit Unions who ultimately replace your original loan with a new one with a lower rate (both for a new car or a used car). These institutions are in the business of lending money and these are the companies you pay your monthly car payments to. They won't help you compare rates or refinance with the same lender, they want new business!

  • Refinance Brokers: Companies that create a marketplace between lenders and you as the customer. These institutions are not the actual lenders but help you as a consumer figure out who the best lender for your loan would be. That said, once they have you on the phone, these companies make more money off you by charging a refinance or doc fee, by selling you GAP insurance and by selling you extended protection products.

  • Affiliate Websites: Websites that rank high in Google's search algorithm aiming to get you to submit your contact details. These companies make money by selling your contact details to either Refinance Brokers or Lenders. Once they have your contact details, be prepared for a whirlwind of emails, text messages and phone calls from people you've never heard about.



Comparison of the best auto loan refinancing websites


In their list of the 10 Best Auto Loan Refinancing Lenders, NerdWallet compares the companies on the following dimensions:

  • Min. Credit Score

  • Estimated APR

  • Loan Amount

  • Key Facts

  • Pros & Cons

  • Product Details

Lenders who offer used auto loan refinancing don't usually differ too much on those dimensions: money is a commodity and therefore, the competing lenders' offerings and competitive rates are nearly identical. Moreover, they all focus on similar model years and have the same minimum loan amounts.


The better comparison would be the degree to which the auto loan refinancing websites are able to refinance you 100% online and from the comfort of your home:

None of the below companies created a 100% digital, end-to-end process that allows you to refinance your loan online. All of the firms require multiple phone calls, emails and text messages and will need up to a week and more to get you into a new / better loan. Nevertheless, let's describe each of them in more detail:


Lenders for car loan refinance


In reality, most lenders who provide auto loans will also offer auto loan refinancing. Your bank or Credit Union wants to satisfy as many of your banking needs as possible. If you have multiple auto loans with different auto loan companies, your lender would be very interested in refinancing the auto loan you currently have with a different lender.


Your bank or Credit Union, however, won't offer you refinancing for the auto loans you have with that very lender. Refinancing basically transfers profits from the lender into the consumer's pocket and therefore, your bank or Credit Union won't be very keen to refinance you with the same lender or helping you on that front.

The following lenders are worth mentioning in the context of auto loan refinancing because all of them have either made inroads into or are putting significant marketing dollars behind their refinancing efforts:


CapitalOne


CapitalOne is the leader in data-driven decision making and auto lending. You can apply for a loan online, choose from different loan terms and make loan payments online. Just with any auto lender, you won't get a lower rate if you make payments over the life of the loan. The only way to lower your payments is to refinance. Find CapitalOne's refinance program at https://www.capitalone.com/auto-financing/refinance.

Bank of America


Bank of America was originally called Bank of Italy, founded in San Francisco. By 1945, Bank of America had grown to the world's biggest retail bank. As with all the big commercial banks, Bank of America offers car loans, primarily for prime credit borrowers. Find Bank of America's refinance program at https://www.bankofamerica.com/auto-loans/auto-refinance-calculator.

US Bank


US Bank is a full service bank offering almost all banking products through its 3,106 branches and 4,842 ATMs and a decent size auto loan business. As a commercial bank, US Bank can only really serve near prime and prime credit borrowers. Find US Bank's refinance program at https://www.usbank.com/loans-credit-lines/auto-loans/auto-loan-refinancing.html.

PNC Bank


Pittsburgh National Corporation and Provident National Corporation joined forced and formed PNC Bank. The auto loan business of PNC Bank is relatively small and won't offer competitive rates in any credit segment. Find PNC Bank's refinance program at https://www.pnc.com/en/personal-banking/borrowing/auto-loans/refinancing-an-auto-loan.html.

Mission Fed


Mission Fed is San Diego's largest credit union. They offer very attractive rates to members with exceptional credit but sadly only serve the San Diego County. Find Mission Fed's refinance program at https://www.missionfed.com/Refinance-Auto-Loan.

Digital Federal Credit Union


Digital Federal Credit Union (DCU) is based in Massachusetts and likely one of the most progressive Credit Unions. DCU even invested in FinTech startups to bring banking online while offering very competitive rates. Find DCU's refinance program at https://www.dcu.org/borrow/vehicle-loans/auto-refinance-loans.html.

USAA


The United Services Automobile Association (USAA) has 13 million members and leads in customer loyalty. Rates are ok while most of the processes are still heavily reliant on USAA's retail branches. Find USAA's refinance program at https://www.usaa.com/inet/wc/bank-car-refinance.

Pennsylvania State Employees Credit Union


PSECU's members include more groups than state employees. They have 450,000 members and offer really attractive rates to membre with excellent credit, primarily through their branches. Find PSECU's refinance program at https://www.psecu.com/loans/auto-loans/refinance.

Educational Employees Credit Union


EECU is a Texas based Credit Union with 225,000 members. Rates are low but only accessible to members who live in the Fort Worth area and with excellent credit. Find EECU's refinance program at https://www.eecu.org/personal-banking/auto/products/auto-loan-refinance.

Wells Fargo


Wells Fargo is the world's fourth-largest bank by market capitalization headquartered in San Francisco. WellsFargo's auto loan program is fairly large and focused on near prime and prime borrowers, with moderate to decent rates. Find WellsFargo's refinance program at https://www.wellsfargo.com/auto-loans/?linkLoc=hb.

Patelco


Patelco Credit Union originally served AT&T. The Credit Union its headquartered in Dublin, near Silicon Valley and is relatively advanced with technology. Rates are competitive but Patelco usually only works with Franchise Dealers and with borrowers in the prime credit segment who get a car on finance. Find Patelco's refinance program at https://www.patelco.org/explore-services/auto-loans.

OneMain Financial


OneMain Financial's provides credit and insurance Americans with limited access to traditional banks and challenged credit. Rates are high but for Americans in the subprime Credit Segment, OneMain Financial can be a good partner. Find OneMain Financial's refinance program at https://www.onemainfinancial.com/personal-loans/auto-refinance.

Fifth Third Bank


Fifth Third Bank has 1,154 branches and is very focused on the offline banking business. Like any other commercial bank, rates are moderate but only accessible to Americans with near prime to prime credit. Find Fifth Third Bank's refinance program at https://www.53.com/content/fifth-third/en/personal-banking/borrowing-basics/auto-loans.html.

Chase Bank


Chase operates more than 5,000 branches and 16,000 ATMs, which makes Chase Bank one of the largest retail bank operations in the U.S. Chase also gives a lot of auto loans, mainly to its customers with decent to great great. Rates aren't impressive. Find Chase Bank's refinance program at https://autofinance.chase.com/auto-finance/auto-refinance.

LendingClub


LendingClub started as a digital, peer to peer lending platform and was celebrated as one of the first successful FinTech lending business. The process starts with an online application, LendingClub will then pull your credit report and provide several loan offers. Unfortunately, LendingClub tried to do too many things at once, was never successful in providing competitive auto loan rates and the share price lost ~80% of its value. Find LendingClub's refinance program at https://www.lendingclub.com/loans/auto-refinancing.

LightStream


LightStream is one of the online lenders and subsidiary of SunTrust bank and focused on people with excellent credit and a long credit history. The application process is 100% online. Like with any other lender, there are no prepayment penalties. Loans from LightStream are usually consumer loans (i.e. a different loan type than a secured auto loan) and don't require a lien on the vehicle title. Therefore, the process is quick and simple, unusual for a financial institution in the auto loan space. Find LightStream's refinance program at https://www.lightstream.com/auto-refinance and SunTrust's refinance program at https://www.suntrust.com/loans/auto-loans-financing/refinance-auto-loans.

Consumers CU


Consumer CU is a progressive Credit Union offering auto refinance loans as well as new car loans. They offer shorter and longer terms and are focused on the segment of the population with good credit. Credit Unions are the right auto loan companies to work with if your loan is currently with a commercial bank and you're looking for a new lender. As with most Credit Unions, the loan applications is not optimized for a 100% online process. Find Consumer CU's refinance program at https://www.consumerscu.org/personal/lending/auto-loans-2.

Navy Federal


NavyFederal is one of the biggest Credit Unions in the US. They're offering personal loans, credit cards, auto loans for used and new vehicles and any other lending product. Credit Unions usually offer the best apr loans but are only an option for people with excellent credit and no repayment challenges. The downside of Credit Unions is that they are not tech savvy and the process to get to a better rate is usually inconvenient. Find Navy Federal's refinance program at https://www.navyfederal.org/loans-cards/auto-loans/auto-refinance-rates.php and we recommend you check for rate discounts should you set up autopay.

PenFed


Just like Navy Federal, PedFed is a Credit Union and focused on people with very high Fico scores. PenFed's product offering ranges from credit cards to personal loans and used vehicle loans. PenFed offers great rates and has the biggest refinance ambitions of any Credit Union. The refinance brokers described below are PenFed's biggest channel for new members who already have a car loan and want to lower their rate and payments. Find PenFed's refinance program at https://www.penfed.org/auto/refinance.



Refinance Brokers for car loan refinance


Auto loan refinance brokers like the ones listed below come and go. They make money through origination fees / loan referral fees, refinance fees and through up-selling GAP insurance and other protection products.


The current batch of Auto Refinance Brokers worth mentioning include:



AutoApprove

AutoApprove is an auto loan refinancing company based in Minnesota. "Getting a quote takes a few minutes [and our] personable loan consultants find you the best lender, and once approved handle the rest." As the description suggests, a customer service employee of AutoApprove will walk you through the refinancing process. You won't be able to refinance 100% online.

Autopay

Like a number of the auto auto loan refinance brokers, Autopay is headquartered in Denver. Autopay's product offering ranged from refinance to lease buyouts. Among the auto refinance brokers, Autopay is the most technologically advanced business offering API integrations for a number of use-cases.

Clearlane

In 2017, Ally Financial purchased the refinancing company Clearlane, "an online marketplace called Clearlane, that connects consumers with leading auto finance providers to finance or refinance their vehicles with ease." Partnering with Ally Financial, Clearlane should be able to offer a variety of loan terms and rates for a wide Fico credit spectrum. Clearlane works exclusively with Ally Financial's loan products and therefore can't compete with the low Credit Union rates for borrowers with exceptional credit.

Gravity Lending

Gravity Lending is yet another call-center based auto refinance broker from Austin, Texas. Gravity Lending advertises to be a fintech company with over 50 years of financial services experience, which seems confusing given that the Internet is barely 25 years old. Similar to the other auto loan companies, Gravity Lending connects car owners with lenders that offer the best rates, terms, and conditions.

iLendingDirect

iLendingDirect is a Colorado based, privately owned company with a very experienced executive team. The business started with providing financing for lease buyouts. Over the last couple of years, iLendingDirect expanded their offering to also help customers refinance their existing auto loans. iLendingDirect charges a $499 processing fee for finding you the best available rate.

Motorefi

MotoRefi is a Venture funded startup based in D.C. The company was incubated by the FinTech focused Venture Capital firm QED. Think of MotoRefi as a matchmaker between customers who want to refinance their auto loan and lenders. 80% of Motorefi's customers end up getting a loan with PenFed. In fact, PenFed wanted to invest in Motorefi. Based on customers reviews, a customer who is trying to refinance his/her auto loan through MotoRefi ends up having a number of phone calls. Moreover, Motorefi charges a $399 refinancing fee. We wrote a thorough review on MotoRefi and conclude it charges fees and only creates savings for those borrowers who qualify.

OpenRoad Lending

OpenRoad Lending was started in 2009 and offers refinancing, vehicle service contracts and GAP insurance. Based on customer experiences, OpenRoad Lending serves a wide range of Fico scores. The process is primarily phone and email based.

RateGenius

RateGenius is a Private Equity owned company out of Texas. On a good month, RateGenius helps approx. 2,000 customers refinance their auto loans. Just like the other auto refinance brokers, RateGenius is a matchmaker between customers and lenders. While RateGenius has a network of more than 100 lenders, most of their loans in fact go to around 20 different Credit Unions and banks. Through selling GAP insurance and extended service plans, RateGenius makes approx. $1,200 in profit per customer. $125 of the profit, RateGenius generates through charging a RateGenius fee. We wrote a thorough review on RateGenius and uncovered hidden fees yet good savings for those borrowers who qualify.

Tresl

Tresl (formerly known as Innovate Funding Solutions or IFS) is a Texas based auto loan refinancing companies also offering lease buyout and company car purchase loans. Similar to the other auto loan refinance brokers, Tresl charges a refinance fee, sells protection plans and GAP insurance to increase the margin on every based on customer reviews.

RefiJet


The Denver based refinancing company RefiJet promises low rates direct to borrowers and in some circumstances, even defers the first two loan payments. The process is over the phone and requires you to send a number of emails with paperwork, based on customer reviews. Most of the company's margin comes from selling extended protection plans and GAP insurance policies. RefiJet is the direct to consumer business of Yield Solution Group, which is also Denver based.

Yield Solutions Group


Contrary to the companies described above, Yield Solutions Group primarily markets its value as "helping lenders reduce the cost of acquisition by using our technology and experience to find those consumers." Auto loan companies get most of their business from car dealerships, which has gotten very competitive. I.e. lenders are paying car dealers high referral fees to get loans when car shoppers are out and about car buying.



Summary of Refinance Brokers


All of these Refinance Brokers above focus their customer facing efforts (e.g. website, app) on capturing the visitor's phone number. Once users provide their contact details, call centers will reach out over email, phone and text message to market their refinancing services.


The margin on refinancing isn't very high, usually around 2% - 6% of the loan volume. Therefore, Refinance Brokers seek to make incremental revenue from refinance and doc fees, selling GAP insurance and selling vehicle protection plans.


These ancillary products can in many circumstances be good products. As a consumer you just want to make sure that you understand what you're purchasing. Refinance Brokers usually roll the purchase price of the protection products into the new loan and we therefore advice borrowers to pay close attention to what they're buying.


Most of these companies are call centers and acquire their customers through one of the following three channels:


  1. Direct Mailers: Unbeknown to you, the credit bureaus Experian and TransUnion sell your data for marketing purposes. Companies in the financial services space often approach the credit bureaus for help sending direct mailers to certain segments of the population, e.g. people with credit scores between 600 - 700 who bought an auto loan 24 months ago. The personally identifiable data is anonymized and not available to the financial services companies. Yet, the credit bureaus allow you to effectively target people who might benefit from refinancing their auto loans.

  2. Google AdWords: Close to 15M people google auto refinancing and related topics every year. Through marketing on Google, auto loan companies can therefore market their services directly to consumers who expressed intent to refinance. We've observed that the traditional lenders are primarily focused on their branches or car dealerships to find auto loan borrowers. Refinance Brokers, in contrast, often allocate some of their spend to Google.

  3. Affiliate Websites: Close to every third American uses the app CreditKarma to check their credit. 40M Americans check their credit on the app every month. While having your attention, CreditKarma and comparable affiliate websites will subtly market financial products to you. Refinance Brokers therefore leverage Affiliate Websites to position their refinance offerings in front of consumers.



Affiliate Websites for car loan refinance


CreditKarma and other Affiliate Websites either have a very loyal customer base or are very good at ranking at the top of Google's searches for a variety of personal finance related topics. The goal of all of these websites is to attract as many users per month as possible and engage users through content.


Successful Affiliate Website have a high number of sub pages, lots of monthly visitors and keep the visitor on page for many minutes. None of these website will charge a user any money. Instead, the users - i.e. YOU - are the product:



Bankrate


Bankrate is a personal finance blog that's 'guiding you through life's financial journey'. Visitors can 'compare rates, crunch numbers and get expert guidance for life's pivotal financial moments'. The website has 29,700 sub pages, some of which are blog posts and a most of them programmatically created. According to Similarweb.com, Bankrate has 14.5M monthly visitors, who read 2.5 pages in 15 minutes on average.



CreditKarma


CreditKarma is a personal website that's become famous for 'Your credit scores should be free'. Visitors can 'check their scores anytime, anywhere, and never pay for it'. The website has 108,000 sub pages, some of which are blog posts and a most of them programmatically created. According to Similarweb.com, Bankrate has 70M monthly visitors, who read 5 pages in 3 minutes on average.



CreditSesame


CreditSesame is a personal website focused on credit cars. 'Free Credit Score, Free Digital Banking. 100% Free. No credit card required. No impact on your score.' The website has 108,000 sub pages, some of which are blog posts and a most of them programmatically created. According to Similarweb.com, Bankrate has 7.9M monthly visitors, who read 4 pages in 3 minutes on average.



HonestCarPayment


HonestCarPayment is a website focused on auto loans promising to its visitors "We’ll help lower your monthly car payment, by providing the transparency and choices that you deserve". The company is Hawaii based and a advocate for car shoppers who are financing their vehicles.



LendingTree


LendingTree is a loan comparison website with 5,070 subpages. Visitors can compare rates for home loans, personal loans, credit cards, insurance, debt relief and student loans. According to Similarweb.com, LendingTree has 13M monthly visitors, who read 3 pages in 4 minutes on average.



LowerMyBills


LowerMyBills is yet another personal finance affiliate website with 598 articles promising to "Simplify Your Tough Financial Decisions' through giving 'Expert Money Advice. Helpful Tools. Products to Help You Save and Make Money'. According to Similarweb.com, LowerMyBills has 1M monthly visitors, who read 1.8 pages in less than 1 minutes on average. The monthly traffic is down by 50% from early 2020.



myAutoloan


myAutoloan is another website focused on auto loans. The 530 subpages allow visitors to 'Compare and Save Up to 4 Offers in Minutes. Refinancing - No payments for up to 90 days for qualified borrowers'. According to Similarweb.com, myAutoLoan has 80k monthly visitors, who read 3.5 pages in less than 4 minutes on average.



NerdWallet


NerdWallet is a personal finance blog with approximately 30,200 articles focused on credit cards. The website's main message is 'Make all the right money moves. Need expert money advice, helpful tools and tailored insights to answer your money questions? Turn to the Nerds.' However, the only vertical where NerdWallet really has an outsized expertise are credit cards. According to Similarweb.com, LowerMyBills has 20M monthly visitors, who read 1.8 pages in around 3 minutes on average.



SavvyMoney


SavvyMoney similar to CreditKarma is focused on giving users access to credit scores. 'Credit A Smarter Credit Score Solution. Credit Score solution for every online and mobile banking platform. Increase engagement. Build deeper relationships'. Through its 1,280 pages and according to Similarweb.com, SavvyMoney has 450k monthly visitors, who read 5.5 pages in around 5 minutes on average.



SuperMoney


SuperMoney is a very goal oriented personal finance website with 8,410 pages most of which programmatically generated. 'Achieve Financial Goals. Select a goal and we'll give you the resources to help you get there'. Goals include buying a home, financing a purchase, finding the best credit card, getting out of debt, refinancing an existing loan and saving money. According to Similarweb.com, SuperMoney has 270k monthly visitors, who read 1.6 pages in around 4 minutes on average.



To rank high in Google's searches, Affiliate Websites create comparison lists, how-to lists or articles with click-baity titles. NerdWallet's 10 Best Auto Loan Refinancing Lenders is a great example of that strategy.


Unfortunately, the quality of the content isn't always great because instead of focusing on a single category - e.g. auto loan refinancing - Affiliate Websites typically cast a very wide net and spread themselves thin as you can see from the descriptions above.



The easy process to refinance your auto loan online now

Contrary to the refinance brokers described about, WithClutch.com is a fully digital platform that lets car owners like you refinance their vehicle loan from the comfort of their own home and 100% online. No need to set a foot in a bank or Credit Union. You can lower your rate or get cash in as little as 20 seconds.


We recommend using WithClutch.com instead of looking for a lender yourself because you will unlikely find the right lender yourself. We distinguish between five different credit tiers:

Super Prime credit (Fico 781 - 850)

Car shoppers with exceptional credit will get the best rates at Credit Unions. Credit Unions are non-profit organizations with a community charter. Rates are usually far below 10%. Customers with super prime credit always know that they can get a really low rate and often just demand to be working with a Credit Union when buying a car from a dealership.


If you only recently improved your credit to the super prime tier, you may not know about Credit Unions, yet. Therefore, you risk approaching a commercial bank for a new loan and you will likely be disappointed.


Prime credit (661 - 780)

Customers with prime credit usually work with commercial banks such as Bank of America, Wells Fargo, Chase, Ally Financial, CapitalOne etc. This auto loan segment is very well understood by traditional banks, who usually pay auto dealers high referral fees to get customers.


Dealers partner with all of these lenders and has maintained good relationships over many years. But if you have your loan with a commercial bank right now, you might not be aware of the excellent rates offered by Credit Unions. Therefore, you risk going to the wrong type of auto lender when trying to refinance.


Watch the following video if you are asking yourself: what is the average interest rate on an auto loan with 700 credit?

Non Prime credit (601 - 660)

When working with car buyers who have slightly challenged credit, auto dealers need to partner closely with lenders who are specialized on auto loans. In that credit segment, lenders need to understand the customer's budget as well as the vehicle they're buying very well.


The lenders need to make sure that customers don't accidentally buy cars that either have too high of a monthly payment or depreciate quickly. If you're in the non prime credit segment now and after making 6 /12 / 18 or more payments on time, you must have had challenged credit before. We've observed that specialty finance companies and commercial banks take advantage of people with challenged credit.


Rates in this segment are very hard to understand and obtain without talking to a number of lenders. You will likely hear a lot of 'No's' if you approach the wrong lenders and therefore get needlessly discouraged.


Watch the following video if you are asking yourself: which bank is best for auto refinance?


Sub Prime credit (501 - 600)

We distinguish between behaviorally sub prime customers and situationally sub prime customers. Behaviorally sub prime customers usually haven't received financial literacy training and therefore often just don't understand in detail how credit works leading to missed payments and defaults.


Situationally sub prime customers, in contrast, used to have prime credit but had an emergency, medical bills, a divorce or medical bills which lead to these customers missing payments. Since close to 50% of sub prime loans are at risk of not being paid, lenders who work in the sub prime credit segment need to be closely integrated with the used car dealer.


As you can tell, the sub prime segment is really tricky and most lenders avoid it. While there are thousands of lenders, you won't know any of the lenders specialized on your credit tier. Therefore, you will unlikely find the right refinance lender for you.


Watch the following video if you are asking yourself: auto loan refinancing for bad credit?

Deep Sub Prime (300 - 500)

In the very challenged credit segment, only lenders who are very tightly linked to / vertically integrated with car dealers are able and willing to provide loans. Usually, more than 50% of loans in the deep sub prime credit segment default and therefore lenders need to have very labor-intensive loan servicing, collections and repossession departments. To maximize the recovery rates, lenders typically require dealers to ask used car shoppers for consent to install GPS devices in the vehicles.


Watch the following video if you are asking yourself: can I refinance my car loan with bad credit?

The deep sub prime segment usually doesn't lend itself for refinancing. Here, we usually delight our customers through credit repair, bankruptcy and voluntary turn-over advice. Our most important advice here is to not shop around loans too much: you will further hurt your credit and it will take longer and longer to help you get on a good path.


Watch the following video if you are asking yourself: what are my options if I can't afford my car payments?

As you can tell, refinancing isn't always straightforward: let us do the legwork for you, follow three simple steps to refinance your auto loan, get approved in seconds and save thousands in minutes.



What are auto refinancing rates today?


The FED recently announced a drop of rates to 0% and therefore, refinance rates vary on a regular basis. The following table shows the auto loan rates by credit score for a new and a used car:


Auto loan companies don't usually publish their refinance rates because they don't really want you to refinance your loan. We found two reasons for why that is:

  1. Auto loan companies make more money from customers who have diligently made all their payments. Those are the loans the lenders love. When you refinance your loan, the auto loan company makes less money.

  2. Auto loan companies get most of their business referred from car dealers. Dealers earn a referral fee. If a car owner refinances her car loan, the auto loan company will claw parts of the referral fee back from the car dealer. The auto loan company wants to keep the dealer happy and therefore prefers for you to not refinance.

Watch the following video if you are asking yourself: auto loan refinance rates?

As you can tell, interests between the car dealer, auto loan company and you the car owner are not aligned. Neither the dealer nor the bank have your best interest in mind.



How does auto loan refinancing work?


To refinance your auto loan, you need to follow three simple steps:

  1. Find a lender with a lower rate.

  2. Submit your details for approval.

  3. Authorize the new lender to pay off your old loan

  4. Make your future payments to the new lender

In practice, however, refinancing your auto loan is a little more cumbersome. Watch the following video if you are asking yourself: how auto loan refinancing works?

The market for auto loans is inefficient, rates are all over the map. People who migrate in credit, i.e. improve their credit over time, usually stay in high-interest auto loans although they could easily refinance. The obvious question worth asking: why aren’t more people refinancing their auto loans?


The answer is two-fold:

  • Most Americans simply don’t know they can refinance their auto loan

  • Americans who know they can refinance usually struggle to find a convenient way to refinance, 100% online and from the comfort of their home


On Google, you’ll find approximately 1.1M auto refinance related searches per month. That means, every year around 15M car owners search for ways to refinance their auto loan.


Unfortunately, barely 5% of all the funded auto loans are refinanced. The challenge with refinancing is that most of the companies mentioned above require multiple phone calls, emails and text messages to get you through the process. None of these companies has a fully digital, 100% online experience.


In fact, most of these companies prefer phone calls to a 100% online experience because the majority of their profits comes from upselling insurance products and extended warranties / services plans.


We recommend you take a look at our auto loan refinance calculator to get a sense for the total amount you could be saving through refinancing before submitting your details on any of the pages above.



When should you refinance your car loan?


Now! You should refinance your car if you got your loan at the dealership and/or if you have made your payments in time and full. As mentioned above, the main reason you can save money through refinancing your auto loan is because you’ve made your payments and improved your credit score. When you migrate in credit, you should switch from your current auto loan company to a different one that is specialized on your new credit segment.


So if the thought 'should I be refinancing my car loan' crossed your mind, watch the following video about how car loan refinancing works?


If your credit score was below 600 when you got your loan, you likely got a loan with one of the following Speciality Finance companies:

  • Credit Acceptance Corp

  • Santander

  • WestLake

  • etc.


When you refinance this loan, you will migrate from the segment of Speciality Finance companies to commercial banks, who specialize on credit scores between 600 and 700.


If your credit score was between 600 and 700 when you got your loan, you likely got a loan with either of the following banks:

  • Ally Financial

  • Bank of America

  • CapitalOne

  • Chase

  • Wells Fargo

  • etc.


When you refinance your loan, you will migrate from the segment of commercial banks to Credit Unions who specialize on credit scores above 700.


If your credit score already was above 700 when you got your loan, you likely got a loan with a Credit Union. Credit Unions have community charters and are non-profit organizations. Hence, you are already paying a very low interest rate.


That said, even if your auto loan is already with a Credit Union, you might still be able to save money through refinancing. 79% of all car shoppers who finance their vehicle get their loan at the dealership. The dealership, however, won’t give you the loan that’s best for you. Instead, the dealership will choose a loan for you that pays the dealer the highest referral fee.


Therefore, you likely can refinance a car loan already the second you leave the dealership lot even if your credit score hasn’t changed at all.



Am I likely to qualify for refinancing at a lower interest rate?


The answer is short and sweat: you are much more likely to qualify for refinancing than you think. Checking if you qualify for a lower rate doesn't cost anything and won't hurt your credit. We therefore encourage you to check if you qualify for refinancing on a regular basis for as long as you do it online.


Watch the following video if you are asking yourself: how does auto loan refinancing affect credit score?

We performed two studies to identify who is most likely to qualify for refinancing at a lower interest rate:


  • The top 40 auto loan companies that are most likely to qualify for refinancing are all Specialty lenders, i.e. auto loan companies focused on the segment of the population with challenged credit. If your credit score was sub-prime and you made payments for 6 / 9 /12 months, you can easily shave 10% of your auto loan rate.

  • The top 5 car brands that are most likely to qualify for refinancing include Kia, Hyundai, Nissan and some specific Chevrolet and Ford models. Cars that are good value for money even new and cars that don't depreciate quickly are easier to refinance because the Loan-to-Value (LTV) - a metric lenders care about - tends to be better for these vehicles compared to e.g. German luxury cars.



Is refinancing your auto loan worth it?


Refinancing your auto loan is 100% worth it. There are no fees associated to refinancing, you will lower your APR, you will lower your monthly payments and you will save money:

On a daily basis, we see customers saving thousands of dollars through refinancing!Take a look at our auto loan refinance calculator and you're able to quantity exactly how much money you could be saving.To give you an example: imagine your current loan has an APR of 15%, your initial balance was $20,000 and you made 12 out of 60 months payments already. Your monthly payment would be $475. After 12 payments, your remaining balance will be $17,096.


Now imagine you improved your credit score and qualify for a rate of 9%. Even if you decide to not lengthen your term but stay with the original term, your monthly payment will drop to $425, i.e. you're saving $50 per month. Sounds little? Do the math: you will be saving $50 for the next 48 payments, which ends up being a total of $2,400 in savings. Totally worth it if you ask me!



Does refinancing a car loan hurt credit?


Short answer is: nope! Refinancing is the same as paying off your existing loan. Paying off your loan does not really affect your credit. Strangely, the credit bureaus count open credit accounts as a positive thing for as long as you make your payment:

At the same time, however, you are indeed applying for a new loan and depending on the lender you work with, some do check your credit.


When applying for a loan, the auto loan company wants to see how well you've made your payments so far. The only way to find out is by checking your credit. In the past, every credit check hurt your credit.


People naturally became very hesitant and therefore, the credit bureaus introduced the 'soft credit pull', which allows the auto loan company to access the exact same information. The only difference: if a lender does a soft pull, other banks will not see that you've been 'shopping for a loan'.



Can I refinance if I’m upside-down on my car loan?


Yes, but it depends how much negative equity you have. $1,500 negative equity is no problem and you can refinance immediately. If you owe more than $1,500 above and beyond your vehicle value, lenders will determine on a case by case basis:

Lending is all dependent on LTV (Loan to Value). The value of your car is determined by a third party - normally Kelly Blue Book, Black Book, or NADA guides. To refinance your loan when upside-down, you want to make sure the lender knows how "valuable" your car is.


Therefore, make sure to provide a complete list of the trim, options, and features to the lender or better yet provide the lender with a window sticker to ensure they have accurate information and have checked off all options and features your car has.


Most lenders have pretty strict rules on "LTV" or the amount of loan relative to value. These typically vary by credit score or income but here are some rough rules based on observed experience with credit unions.

  • Good Credit (720+) can loan up to 130% of LTV. Or can lend $13,000 on a car valued at $10,000.

  • Medium Credit (660-720) can lend up to 115% of the vehicle LTV. So 11,500 on a $10,000 loan

  • Lower Credit (600-660) can typically lend up to 100% of the vehicle LTV.

Bad Credit (<600) can typically lend a maximum of 80% of the value of the vehicle. Or get an $8,000 loan on a $10,000 vehicle.


The other things to keep in mind is that if the vehicle is older then typically LTV requirements go down by 10-20% (so a 2008 vehicle may only be eligible for 70% of LTV for a customer who wants to refinance auto loan with bad credit). The only way to get a chance of a low interest auto loans for bad credit is by getting to a very low LTV.



Frequently asked questions (FAQs) about refinancing


While simple on the surface, auto loan refinancing often leads to a number of commonly asked questions. After all, you're looking for the best loan deals possible. Going into all these questions would go beyond the scope of this article.


Therefore, we’ve collected an ever-growing list of frequently asked questions and answers with engaging explainer videos here. To make it easy for readers to find what they’re looking for, we sorted the questions in 12 categories:


1) Best Bank for Refinancing



2) Credit Impact of Refinancing



3) Credit Score to Refinance



4) How to Refinance if Close to Defaulting on a Payment



5) Loan Payoff to Refinance



6) Loan Rates for Refinancing



7) Other Savings next to Refinancing



8) Payment Amount when Refinancing



9) Process to Refinance



10) Refinance Definitions



11) Savings Potential from Refinancing



A number of our visitors also have specific questions around how to refinance their current lender. The best loan you can get is from a Credit Union. Credit Unions are non-profits, have tax-advantages and serve their community. Although you may be member of a Credit Union, there is a very high chance that you got your loan with a lender that is not the Credit Union.


You probably got your loan at the dealership when you bought the car, which isn't ideal because your Credit Union would've offered you a lower rate. We therefore created two sections below:

  1. How to refinance with your Credit Union

  2. How to refinance your current lender


How to refinance with your Credit Union



How to refinance your current lender


A few words about the authors: Christopher Coleman and Nicholas Hinrichsen met at Stanford Business School in 2011. Before getting their MBAs, Christopher went to MiT and worked at McKinsey. Nicholas Hinrichsen got his undergrad degree at European Business school and spent time with Bain & Company and Merrill Lynch. In 2013, the two automotive entrepreneurs started a company called Carlypso, went through YCombinator, raised $10M from August Capital and sold the business to Carvana in 2017. While running Carlypso, Christopher and Nicholas worked closely with a number of Credit Unions through CUDL such as Golden 1, San Mateo Credit Union, Redwood Credit Union and Patelco just to name a few. Moreover, the founders originated loans for commercial banks such as CapitalOne and Ally Financial and even specialty finance companies such as Westlake Financial. The two entrepreneurs started WithClutch in June 2020 and are supported by FinTech and automotive entrepreneurs as well as technology investors such as Andy Rachleff, Gokul Rajaram, Joel Peterson, Robert Chess and Brian Reed just to name a few.

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