When Can You Refinance a Car Loan?

Written by Kim PinnelliUpdated: 28th Mar 2022
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Your car loan isn’t written in stone forever. If you don’t like the rate or term, you may be able to refinance it. Hurry, though, because the benefits wear off after a certain amount of time, making it unnecessary to refinance in specific circumstances.

Here’s what to know about when you can refinance a car loan.

How Long Do You Have to Wait to Refinance a Car Loan?

The title must be with the lender before you can refinance your car loan, which doesn’t happen very quickly. For most lenders, it can take as long as 90 days to receive the title, so at a minimum, you should wait 90 days.

You should likely wait longer if you’re refinancing to get a better rate or term. Your credit score will likely take a hit when you first take out a loan, so give it time to rebound; plus, you need time to prove you can handle your current car payment well to get the best rates and terms.

>> More: Best Auto Refinance Lenders

Understanding Refinancing Your Car

Before you refinance your car, you should understand what it entails and what’s required of you. There’s no guarantee that you’ll be able to refinance your car just because you have a car loan now. The key is to improve your qualifying factors and make the most of your situation.


Every lender has different requirements, including credit score minimums, debt ratio maximums, and even the age, make, and model of your car. Read the fine print and see what each lender requires before applying to refinance your car.

You’ll need a 660 – 680 credit score, 40% or lower debt-to-income ratio, and stable income and employment. Auto lenders don’t do much digging as mortgage lenders do, but you must still prove you are a good risk, starting with your credit score.

Interest Rates

If your goal is to save money or get a better rate after improving your credit situation, shop around for the best interest rates. Each auto loan lender charges different rates, so pay close attention to the rates and the terms. The shorter the term you can accept, the better your rates will get.

Credit Score

Auto loans don’t require great credit scores, but like any loan, the higher your credit score is, the better the rate you’ll get. Aim for a 680+ credit score to get the best rate and terms. If you aren’t sure what your credit looks like, you can get your free Experian credit score by signing up with Experian.

You can also get all three of your credit reports (no score) here weekly. These credit reports from TransUnion, Equifax, and Experian show your credit history, which you can use to determine if you need to fix your credit. Look for things like:

  • Late payments (bring them current)
  • Credit lines extended beyond 30% of your credit line (pay them down)
  • Fraudulent information (report it)
  • Credit report mistakes (report it)
  • Too many inquiries (don’t apply for new credit)

Prepayment Penalties

Always check your current loan to see if there is a prepayment penalty. You might not have realized it when you signed for the loan, but there could be a cost if you pay the loan off before a specific date. If that’s the case, it usually doesn’t make sense to refinance your car.


You must prove you have steady and enough income to cover the cost of your existing bills plus the new car loan if you are refinancing. Auto loan lenders are more relaxed regarding your debt-to-income ratio than other lenders, such as mortgage lenders, but it’s still an area to focus on.

When Should You Refinance Your Car Loan?

Knowing when you should (and shouldn’t) refinance your car loan is important. Here’s when to consider it.

First 60 to 90 Days of the Car Loan

You should be able to refinance right after you get your loan, AND the lender has the title. That could take a few months, so make sure you wait. If the title hasn’t reached the lender yet, most other lenders won’t consider refinancing your loan for the risk of not ever receiving the title.

After 6 Months

After six months, your lender should have the title, and your credit score should have recovered from the ‘new credit’ ding when you took out the car loan. This gives you time to prove you make your payments on time and you have a good credit history and deserve a better rate or term.

First Time Car Buyers Should Wait a Year

If you have minimal credit or have never had a car loan before, consider waiting a year. This gives new lenders enough proof that you can afford your loan and make your payments on time. They don’t want to take chances with new buyers, so the more history you can provide the lender with, the better off you’ll be.

Can You Refinance a Car Loan at Any Time?

You can refinance a car loan at any time, but it might not make sense to do so. Make sure you compare the total cost to your savings. Will you save enough to make refinancing worth it?

You should have AT LEAST 2 years left on your loan if you want to refinance. Some lenders won’t refinance your loan if you don’t have enough time left on it, and since you pay the interest towards the start of the loan, refinancing doesn’t make sense if you’re too far into it.

Does It Hurt Your Credit to Refinance Your Car?

Each time you take out new credit, it can slightly ding your credit score. You get hit for the inquiry and again for the new credit because it lowers your credit’s average age. Fortunately, your credit score can bounce back with a good payment history and time. It’s best if you don’t do anything else with your credit for six months or so to ensure that your credit score bounces back quickly.

Bottom Line: When Can You Refinance a Car Loan?

You can refinance a car loan as soon as the lender has the title, but it’s often best to wait longer. First, decide why you’re refinancing. If you’re trying to get a lower interest rate, wait until your credit score reflects your timely payment history and bounces back from the new loan.

If you need to stretch out the term to lower your payment because your income dropped or you need a little more breathing room, you can refinance sooner, but always make sure it makes financial sense before jumping on board.

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Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.