Should I Refinance My Car Loan with the Same Lender?

If your credit improves or interest rates drop after you finance your car, you may end up overpaying. The good news is you may not have to stick it out for the rest of your loan term. 

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Auto loan refinancing helps borrowers replace their existing auto loans with new and improved ones. Because interest rates fluctuate with market conditions, it’s worth monitoring in case a better rate becomes available.

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But where can you find the best rates? A natural first step is to check with your current auto loan lender. However, don’t stop your search there. Here’s a closer look at refinancing your car with the same lender, why shopping around is important and how to get started.

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Can you refinance a car loan with the same bank?

You may be able to refinance your car loan with the same bank, but it’s not guaranteed — nor will it always be your best option. Some banks, such as Bank of America, allow internal refinancing, while others, like Capital One, don’t.

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You can often find your bank’s policies online, but in some cases, you may need to contact its customer service department. However, even if your bank will refinance your auto loan, you can improve your odds of getting a competitive deal by shopping around with other lenders.

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Pros of refinancing with the same lender

Refinancing your car loan with the same bank can offer several benefits, such as:

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• A streamlined application process: Your lender already has your information, so it may pre-fill some of it during the application process. For example, you may not have to enter personal details like your name, address or Social Security number. 
• Faster approvals: Your lender may be able to make a faster lending decision since it has your borrowing history on file. 
• Discounts or incentives: You may receive a loyalty discount or incentive for staying with your lender. ‍
• Familiarity: Managing a loan with a new lender can come with a learning curve. By sticking with the same bank, you already know the account management system. That means no new logins to remember, no new apps to download and no unfamiliar website to navigate.

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Cons of refinancing with the same lender

Refinancing with the same lender can also come with a few potential drawbacks. These include: 

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• Limited options: When you refinance with the same lender, you're limited to the rates and terms it's willing to offer you. 
• No new customer perks: You may miss out on promotions other lenders offer new customers. For example, Navy Federal Credit Union offers a $200 bonus to customers who refinance their auto loans from other lenders. ‍
• Lost coverage: If you have coverage like GAP or credit insurance on your current loan, it may not transfer to the new loan.

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Considerations for auto loan refinancing

To decide if an auto loan refinance makes sense for you, you’ll need to shop around and collect quotes. As you do, here are the main factors to consider:

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• Interest rate: What is the interest rate on the loan? 
• Repayment term: How long will it take you to pay off the loan? 
• Fees: Does the refinance come with any fees? How much will they cost you?
• Monthly payment: How much do you have to pay per month on the loan?
• Overall cost: How much will the loan cost you over the full term?

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Once you’ve received a few quotes, you can create a table like the one below to see if any beat your current loan.

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The chart clearly shows you how each loan will impact your monthly and overall costs. For example, while quote two might seem appealing due to the larger drop in the monthly payment, it ends up adding about $300 to the overall loan cost due to the longer term. Meanwhile, quote one offers less savings per month but more than $500 in savings overall. 

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In this case, the better fit will depend on whether you care more about a lower monthly payment or a lower overall cost. 

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‍Tip: You can use our auto loan refinancing calculator to estimate the monthly payment and overall cost figures of different loan options.

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How to refinance your car loan with the same lender

The process of applying for an auto loan refinance will vary by lender, but you can often apply online or over the phone. If you don’t see a way to apply, contact your lender’s customer service department for guidance. 

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During the application process, you’ll typically need your vehicle’s year, make, model, mileage, trim or vehicle identification number (VIN). Additionally, banks often ask about your personal identifying information, contact details, desired loan amount and term, employment status and financial situation. All or most of this may already be in your lender’s system. 

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After you apply, your bank will review your application and provide you with a decision. If you get approved, you can review the proposed rates and terms to see if they justify the refinance. 

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‍Looking for more guidance? Head over to our dedicated resource hub for auto refinancing.

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FAQs

Review our frequently asked questions to learn more about refinancing with the same lender.

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Is it better to refinance a car with the same lender?

It may be better to refinance a car with the same lender, but it depends on your situation and the other loans available to you. Check what your lender offers and compare it to at least three to five other quotes. Review the interest rates, monthly payment amounts, terms, fees and overall costs to find the best fit.

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Are there disadvantages to refinancing a car loan?

Refinancing a car loan can come with a few potential disadvantages. For starters, you'll undergo a hard credit check when you apply, which can drop your credit score by a few points. Additionally, the refinance may cause you to incur a prepayment penalty from your current lender or an origination fee from your new lender. Extending your loan term could also increase your overall borrowing costs if you don’t get a low enough interest rate.

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Will my payments be lower if I refinance my car?

It's possible to lower your car payment by refinancing your auto loan, but there are no guarantees. If your loan term stays the same and you get a lower interest rate, your monthly payment will be lower. It could also be lower if your interest rate stays the same but you opt for a longer term — although that would increase your overall costs.

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How long should you wait to refinance a car?

It’s up to you, as most lenders don’t require you to wait any set amount of time. However, you may want to wait for the title to be delivered to you or your current lender, which can take up to a few weeks. Another consideration is your credit. It could take some time — perhaps as long as six to 12 months — for your credit to recover from the credit inquiry and a large new outstanding balance.

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Can refinancing my auto loan help me pay off my loan quicker?

Refinancing your auto loan can help you pay off your car quicker if you get a lower interest rate and opt for a shorter term. However, even if you keep the same term, you could speed up the payoff process if a lower monthly payment enables you to make extra payments.