Car loan refinancing is an excellent opportunity for those tired of paying hefty monthly payments. You replace the existing loan with a new one for potential benefits, such as a lower interest rate and flexible repayment terms.
However, refinancing is not always the right move, especially if you want to do it more than once.
If you’re wondering, how many times can I refinance my car? This guide is for you. Let’s take a closer look at the factors that determine how often you can refinance a car loan and whether it’s a good idea.
How Often Can You Refinance an Auto Loan?
The answer is pretty simple. There’s no legal limit to how many times you can refinance a car loan. All you have to do is meet the eligibility criteria. Moreover, compare different lenders and choose the one that’s offering a better interest rate.
However, some lenders want to see at least six months of payments on your current loan before approving your refinance application.
While each lender has its own eligibility criteria, most of them consider the following:
Loan-to-Value Ratio
A loan-to-value (LTV) ratio shows lenders how much of the asset you’re borrowing against. It is your auto loan amount divided by your vehicle’s market value, expressed as a percentage. Lower LTVs, ideally below 100%, indicate lower risk for the lender. This is why there are better chances for favorable terms like lower interest rates when refinancing.
A lender like RefiJet would take a closer look at your loan’s balance relative to your car’s worth. The main purpose is to confirm you’re not going upside down on your vehicle loan. If you owe more than the vehicle’s original cost, you might not qualify for refinancing.
Car’s Age and Mileage
Lenders also consider your car’s age and mileage before approving your refinance application. If a car has been on the road for more than 10 years, a lender might not offer refinancing or at least favorable loan terms. The same goes for a car with over 150,000 miles.
If you’ve had this car for a long time, you would have accumulated far more miles than many lenders allow. Always check with your chosen lender before proceeding.
Credit Score
Your credit history greatly impacts your ability to refinance a car loan. You need a credit score of at least 670 to qualify for better refinancing terms.
If you have poor or low credit, you might qualify for refinancing, but lenders might not offer favorable interest rates. Moreover, your debt-to-income (DTI) ratio shouldn’t exceed 50%.
Overall Financial Situation
For lenders, refinancing brings greater risk. This is why they might ask you to show detailed proof of income. Lenders want to make sure you have the financial means to make monthly loan payments.
Bottom Line
As mentioned earlier, there is no legal limit to how many times you can refinance your car. But compare the pros and cons of refinancing and assess numerous factors to make an informed decision.
