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    How Often Can You Refinance Your Auto Loan?

    Many people will find themselves at a stage where they need a loan to help buy a car. But what if, having taken out a loan, you find a cheaper option down the line? You’re not stuck with your current auto loan, and have the option to refinance it elsewhere. You can do this as many times as you find lenders willing to finance you; put simply, there’s no legal stipulation to how often you’re allowed to upgrade. 

    Refinancing can get you a lower rate, saving you money in the long term. Just be sure to carefully assess the costs and fees, as each financier has a different offer.

    How Long to Wait Between Refinancing?

    While you can refinance as often as you like, bear in mind that some lenders may turn you away if your loan has undergone this process several times. However, generally speaking, you can technically refinance your loan immediately. In practice, this may be hard to achieve, as many lenders will require proof of your trustworthiness through a set period of proven loan payments. 

    Be aware that when refinancing, you may have to pay your previous lender a prepayment penalty, a fee charged when you pay off your debts early.

    When is the Right Time to Refinance?

    There are a variety of reasons why you might want to refinance your current auto loan, the most important being that you could save a fair bit of money, so it’s worthwhile to stay savvy and keep an eye on competing lenders. Below are some common reasons to switch up.

    • You’ve found a lower interest rate

    Often you may come across a better rate after the fact. Perhaps your friend mentioned a lender to you, or you see a new rate advertised elsewhere. If it’s possible to save money on your monthly payments, switching is a great choice. Just be sure to factor the costs of leaving your old loan and starting a new one into your calculations, as it may take you a while to make your money back.

    • You want as longer-term loan

    Perhaps you’re struggling to make your monthly payments, and need a respite. Refinancing onto a longer-term loan will cost more in the long term, but will mean that your monthly rates are lower, which could afford you the breathing room that you need.

    • Your credit score has changed

    The interest rate you’re offered will be affected by your creditworthiness. If you had a poor credit rating when taking out your auto loan, but now have a much better one, you might find you’re eligible for a lower interest rate, and so it’d be worth refinancing.

    • You earn a significantly different amount to when you took out the loan

    If you now earn a lot more, or even a lot less, than you originally did when taking out your auto loan, you may need to refinance. If you can’t keep up with monthly payments that are now too high for you, or you have the capacity to pay the loan off a lot faster, it’d be worth switching.

    What are the Risks of Refinancing?

    While refinancing your loan could save you a lot of money, it's not without its risks. Here are some of the potential pitfalls of changing your lender.

    • It can affect your credit score

    Changing your provider can affect your credit score, as many will complete a hard credit check. When you apply to see if you’re eligible, the lender will assess your credit. If too many of these are run, your score will begin to decrease. 

    • Losing money over time

    Some auto loans can last a very long time, which can be useful if you can't afford your current monthly rates, and need to see them drop. However, a slightly lower rate but for a much longer time will see you losing money in the long run.

    • Fees and hidden costs

    Very few financiers are totally fee-free, and even less when you’re refinancing a loan. Be sure to go through your agreement’s small print with a fine-tooth comb, as you’ll most likely be charged a variety of fees. These could even be so large that they offset the savings you'll make from switching. 

    • Upside down loans

    If your loan goes on for too long, you might end up with what's known as an upside-down loan. This is where you owe more money on your car than it's actually worth, and isn't a good situation to be in. If you find yourself in this position you need to pay off the loan as soon as possible.


    Refinancing your auto loan has the potential to save you money, and if your circumstances have changed dramatically, it may save you a lot. You can refinance as many times as you’d like, so don't be afraid to switch to a better deal if you find one. However, be aware of hidden fees and costs that could eat away at your expected savings. 

    Be sure to shop around, and use online resources such as comparison tools and interest calculators to find the best deal.