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How Soon Can You Refinance A Car?

Hanna Kielar4-minute read
UPDATED: December 12, 2022


After you buy a car, you may find that the interest rate and loan terms no longer suit your situation, or you may discover a better deal on an auto loan elsewhere. So is it ever too soon to refinance your car?

Let’s take a look at how soon you can refinance a car loan after purchase, when you should refinance, and when it’s best to tap the proverbial brakes on a refi.

When Can You Refinance A Car?

On average, you’ll need to wait at least 60 – 90 days to refinance your auto loan because the car’s title requires time to fully transfer over into your name. Once this happens, you can refinance at your leisure.

How To Refinance A Car Loan

Refinancing a car means replacing your existing auto loan with a newer one, ideally with lower rates and monthly payments. The process is similar to getting a car loan, but this time the new loan pays off your original loan.

Make sure you have the following documents ready before beginning the car loan refi process:

  • A photo ID or driver’s license
  • Your vehicle’s registration
  • Proof of car insurance
  • Proof of income
  • Proof of your residence

Additionally, you’ll need to provide your vehicle identification number (VIN) and submit a 10-day payoff statement from your current lender. This statement from your lender shows your payoff amount to purchase the vehicle, including 10 days’ worth of interest.

When You Should Refinance Your Car Loan

Refinancing a car loan at the right time can lower your monthly payments and lead to saving money in the long run through better loan rates.

Refinancing may be a good idea in any of the following scenarios:

  • You’ve improved your credit score. If your credit score now is higher than when you applied for your car loan, you are likely to qualify for a better rate with a new loan.
  • Auto loan interest rates have gone down. The market is constantly changing, and if you refinance your loan while interest rates are trending low, you can find more favorable rates.
  • You have a solid payment history. Your credit report will show if you’ve been making on-time loan payments. If so, it can boost your creditworthiness in the eyes of a lender when refinancing. A lender that doesn’t see you as a risky borrower may be more willing to work with you to find lower rates and better terms.
  • You can’t afford your monthly payments. If you’re having trouble keeping up with your auto loan payments, refinancing may be the only way to avoid defaulting on your loan.

When To Wait On Refinancing A Car

Refinancing isn’t always the solution – and sometimes it can even make your situation worse. Hold off on pursuing a refinance loan if any of the following is true:

  • It could negatively affect your car insurance. Refinancing can cause changes in your car insurance policy and possibly impact your premiums. You should contact your car insurance company and see how refinancing might affect your policy. It’s possible that a refinance will actually lower your insurance rate.
  • There’s a prepayment penalty. Some auto loans include prepayment penalties that the lender charges if you pay your car loan off early. Since a refinance loan pays off your existing loan, refinancing can incur this fee. If the charge outweighs your gains, refinancing probably isn’t your best option.
  • You’d get a longer loan term. If a refinance loan offers a longer term, that may at first seem like a benefit. However, because financial institutions charge interest over the life of the loan, you’ll probably pay more in the long run.

What’s The Soonest You Should Refinance?

You’ll typically need to wait 60 – 90 days after getting your loan before you can refinance your car. While that’s the soonest you can refinance, you may want to consider waiting a little longer.

Waiting at least 6 months to refinance can give you time to improve your credit score and secure better rates and terms. If you recently became a first-time car buyer, you may want to wait at least a year to refinance so that you can build up a solid payment history for your credit report.

There’s also such a thing as refinancing too late, however. It’s best to refinance with a minimum of 2 years left on your loan so you can take full advantage of refi benefits. Some lenders have requirements regarding the remaining time on your loan, the remaining balance, and the vehicle’s age and mileage.

FAQs About Refinancing A Car

How do I refinance my car loan early?

You can begin the refinance process anytime after your vehicle’s title is fully in your name. Most lenders won’t approve a refinance for a loan that’s been open for fewer than 60 – 90 days.

Should I refinance my car loan with bad credit?

If you bought a car with bad credit and your score hasn’t since improved, there’s little benefit in refinancing until you build up your credit history. You may not qualify for better rates if your credit score hasn’t gone up.

Can I refinance a car loan with the same bank?

Yes, if your original lender – be it a traditional bank, credit union or online lender – offers refinance loans, you can refi through that lender. However, it can’t hurt to shop around and see if there’s a better deal elsewhere.

The Bottom Line: A Refi Is Best When The Time Is Right

Refinancing is possible fairly early into the life of a car loan. Always consider, though, whether now is the best time to refinance or waiting could reap more benefits and make your loan easier to pay off.

If you’re thinking of instead pursuing a trade-in, see how soon you can trade in a financed car.

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Hanna Kielar

Hanna Kielar is a Section Editor for Rocket Auto℠, RocketHQ℠, and Rocket Loans® with a focus on personal finance, automotive, and personal loans. She has a B.A. in Professional Writing from Michigan State University.