Refinancing your auto loan can be done as often as you want, and you can find a lender willing to lend you the money. Legally, there is no set limit. However, it may not be the best option to do it that often.
Depending on each lender’s rules, you may or may not agree to refinance. Once you have refinanced, getting a good loan offer will often be more complicated.
How long should you wait to refinance your auto loan?
You can refinance your car from the moment you buy it; there is no stipulated time to have a refinance. However, you cannot acquire a new loan until you have the title from the dealer or the previous owner.
Another option is to receive a cash refund from the manufacturer in exchange for financing and then refinance at a reduced rate with your bank, online lender, or credit union.
Now, these are options available to those with good credit; if you have bad credit, it will be more complex. You must demonstrate that you have a decent credit history or have made timely payments.
It is advisable to wait at least one month before accessing the first refinancing; this allows you to improve your credit score and have more options and better interest rates. After the first refinancing, you should evaluate the possibilities before opting for a new one.
When should you think about refinancing your car?
You need to know which are the best times to get a refinance; try not to do it recurrently because, eventually, there will be more debts to pay off, and you may not evaluate the interest rates correctly. In any case, it is a good choice when:
Reduce your vehicle payment
The mission of refinancing your car is to reduce the monthly price you pay for the vehicle. It is a good choice to refinance for a lower payment; after a prudent time, start looking to refinance for a shorter term.
That will help you pay off the debt faster, save money, and avoid damaging your credit history.
Do it when you get an interesting offer
Another goal is to save money on a monthly interest rate, which you will get when you have improved your credit score. If you have a good credit history, experts will choose to offer you a lower APR than what you are currently paying.
Is there a problem if I refinance many times?
Refinancing many times lowers your credit score considerably. There is a 14-day window to apply to different lenders, and each one has a single credit inquiry that will start to lower your credit score temporarily.
If you do the same thing too often, you risk ending up with an “upside-down” loan; that is, you’ll pay more than the car is worth when you refinance it for longer terms. This process can cause difficulties when you want to sell your vehicle.
Avoid refinancing your car in these cases
There are many benefits around refinancing a car loan. However, there are times when the smartest thing to do is to run away from them. If you are facing any of these possibilities, you should avoid them:
When refinancing, you lose money
The mission is to save as much as possible with the refinancing, so before doing it, you should evaluate that you will not have losses in the future. For example, if you have a savings of $500 but the refinancing fees are $550, then it’s not worth it.
You have a car that is too old or has too many miles on it
There are times when the vehicle will no longer be eligible; almost all lenders will indicate some conditions to approve you for refinancing; among them are the age and mileage of the car.