How Often Can You Refinance a Car Loan?

How does refinancing a car loan affect your credit?

Every time you apply for credit, the lender will run a hard check on your credit report. If you can qualify for a lower interest rate or you want to lower your payment with a longer loan term, it might be worth the small ding to your credit.

Hard inquiries only knock a few points off your credit score, and it’ll recover after a few months.”

Refinancing multiple times in a short period, however, can multiply the negative impact on your credit report and it can take longer to rebound. Remember hard inquiries stay on your credit report for 24 months.

So, if you’re looking to borrow again in the future, lenders might see the multiple credit inquiries and view you as too risky.

Should you refinance your car?

There are two main scenarios where it makes sense to refinance your car loan.

If your credit has improved

“Has your credit score increased since you took out the loan?” asks Dudum. “If so, you may qualify for a lower rate than you did when you first bought the car—which means savings in your pocket.”

Keep an eye on your credit score by using a credit monitoring service like Credit Sesame or myFICO.

You need to lower your monthly payment

Refinancing at a lower rate can lower your interest bill,” says Dudum. But not everyone can qualify for a lower interest rate.

Dudum adds, “You can also refinance to lengthen your auto loan’s term and reduce your monthly payment.”

This is a great option if money is tight. It will mean more interest paid over the life of the loan, but that might be worth having a little more wiggle room now.

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