Skip to Content
Auto Refinance Stock Pic

Can I Refinance My Car (And Should I?)

Considering auto refinancing? Read more to see the pros and cons of refinancing and if it is right for you.

neonbrand-zc-FMR2m7qI-unsplash.jpg#asset:18577


Refinancing a car loan involves borrowing another loan to pay off your first one. When you choose to refinance your car, you go through a similar process as you did for the initial financing.

You may wonder, “can I refinance my car”, and naturally, as with any financial decision, there will be benefits and drawbacks to refinancing. We’ll go over those here.

Benefits Of Refinancing Your Car

Lower interest rates

Often, people refinance in order to get a more favorable interest rate. If you didn’t get a very good rate with your initial loan and your credit has improved, refinancing can save hundreds (or even thousands) on interest.

Lower monthly payments

Refinancing also effectively extends the life of your loan, resulting in lower monthly payments.

For example, if you bought your car for $8,000 and you’ve paid off $3,000 of that on a 66-month loan, refinancing to a new 66-month loan would divide up the remaining $5,000 over that time period. This translates into lower monthly payments and a lighter financial burden.

Drawbacks Of Refinancing Your Car

More interest over all

While you might be able to refinance to a lower rate, you may end up paying more interest overall. As you extend the life of the loan by refinancing, there will be more time for interest to accrue. In many cases, this will result in you paying more interest in total than you would have otherwise.

Paying more than the car is worth

Also, cars depreciate over time, meaning you could quickly end up owing more on your loan than your vehicle is worth. As such, refinancing can easily result in your being underwater on the loan.

Processing fees

Car loans often have processing and application fees associated with them. Since you’re literally applying for a new car loan, you’ll want to take those fees into account. At the very least, you should find a lender who doesn’t charge as much in processing fees.

Prepayment penalties

Some loan documents include prepayment penalty clauses, resulting in additional fees if you pay off the loan early. If your current loan has a prepayment penalty, refinancing may not be the right choice for you.

Does It Make Sense To Refinance My Car?

Has your credit improved?

If your credit has improved since you were approved for the initial loan, you’ll probably qualify for better terms this time around. If it hasn’t, refinancing might not be much of a benefit to you.

Have interest rates dropped?

Likewise, if interest rates have dropped, refinancing could net you a better rate and lower monthly payments overall.

Are you struggling to make payments?

Between getting lower rates and spreading the remainder of the loan over a longer period of time, you can make your monthly car payments more manageable. If you’re struggling to make your car payments on time, refinancing can be a good option, but it might also be more difficult to get approved if you have a less favorable payment history.

Has your financial situation improved?

If you’re earning more or if other financial burdens have diminished since you started paying on your car loan, you might be able to take on higher monthly payments by refinancing to a shorter loan term. This way, you’ll pay less interest by having lower rates and you will have less time for the interest to accrue.

Are the potential fees less than what you’d save by refinancing?

If you can find a lender who doesn’t charge application fees and if your current loan doesn’t have a prepayment penalty, you’ll have fewer obstacles to refinancing.

Do you need a new lender?

If your current lender doesn’t return calls or hasn’t been as communicative as they should be, switching lenders by refinancing can be a beneficial change.

Do you still owe a significant portion of your loan?

If you’ve paid off most of your loan, refinancing wouldn’t make much sense.

On the other hand, if you’re still early in your repayment period, you’ll end up saving more on interest now than you would a year or two in the future.

Does your car have a lot of miles?

If your car has many miles on it, refinancing it won’t make as much sense since it has most likely depreciated greatly in value. Refinancing may cause you to spend more on the car than it is actually worth.

Deciding Whether To Refinance Your Car

By evaluating your current financial situation, you’ll be able to determine whether or not is is a good idea to refinance your car.

Entering your information into a financial calculator can help you do the math and see what would work best for you. Remember, if you ever need any help, our Listerhill Member Advocates can help you answer these questions and more.

Learn more about car refinancing in these related articles:

default icon for Solution Finder Intro
What can we help you with?
default icon for Checking For Mature Members
What are you borrowing for?
default icon for Checking For Mature Members
Vehicle Options
default icon for Checking For Mature Members
Home Options
default icon for Carrolls
What are you saving for?
default icon for Carrolls
How old are your kids?
default icon for Cord
Which of these banking options are you interested in?
default icon for Cord
How old are you (or your child)?
default icon for Cord
How old are you?
default icon for Cord
What kind of account are you looking for?
search popup background

What are you looking for?

Common Links

Frequently Asked Questions

  • How am I eligible for membership at Listerhill if I don't live near a branch?

    You can become eligible for membership at Listerhill anywhere in Alabama if you join the Alabama Consumer Council or the Athens State Alumni Association. In Tennessee, you can also become eligible for membership if you join the Athens State Alumni Association. This membership is initiated at no cost to you and doesn't require any setup on your part outside of the normal application process to become a member of Listerhill.

  • How can I access my Listerhill accounts without a nearby branch?

    If you live in Alabama or in Tennessee but don't have a Listerhill branch location nearby, there are still plenty of ways to access your accounts. You can use our online banking, mobile banking app, and cards app to access your accounts from your devices. You can also take advantage of our CO-OP Shared Branches for easy access to your money wherever you are. If you need to get in touch, we're always one call away.

  • Can I open a Listerhill account online?

    You can open your Listerhill account, loan, or credit card from the comfort of your home with our easy online application. Or, if you want to apply for a mortgage, you can learn more about our offerings and start your application here.

  • Am I eligible for membership at Listerhill?

    If you live, work, attend school, or own property anywhere in Alabama or Tennessee, you're in luck! You're eligible to become a Listerhill member.

  • The Great Giveback Official Rules

    1. Eligibility: No purchase or obligation necessary to participate and win. All participants must be 19 years of age or older at time of contest participation. Employees of Listerhill Credit Union are not eligible to register for the contest.

    2. How To Enter the Contest: All Listerhill members who have consumer loans in good standing, (subject to limitations below) are automatically entered. Anyone who takes out a new loan with Listerhill Credit Union, or refinances a loan from another lender with Listerhill Credit Union (subject to limitations below) will automatically be entered to win. Limit of one entry per loan.

    NO PURCHASE NECESSARY: To enter the contest without a loan, send a self-addressed, stamped envelope to: Listerhill Credit Union, P.O. Box 566, Sheffield, AL 35660, Attn: Great Giveback Contest Entry. Limit one entry per person. Written entries must be received no later than July 3, 2021.

    Listerhill Credit Union will not be responsible for incomplete, lost, late, misdirected or illegible entries or for failure to receive entries. All entries become property of Listerhill Credit Union and none will be returned. Any questions regarding the number of entries submitted shall be determined by Listerhill Credit Union in its sole discretion, and Listerhill Credit Union reserves the right to disqualify any entries by persons determined to be tampering with, violating, or abusing any aspect of the contest.

    3. Contest Entry Requirements: In the event the Credit Union, in its sole discretion, determines that any Entry contains content that does not comply with these Official Rules or does not otherwise comply with regulatory guidelines, Credit Union reserves the right to disqualify the entry.

    4. Determining the Winner: A Credit Union employee will select at random four (4) $500 winners (one per day July 12-15) and one Grand Prize Winner from all entries received on July 16, 2021. You do not have to be present to win.

    5. Prizes: $500 Cash Prize: the Credit Union will award four (4) members with $500 cash each. Grand Prize: The Credit Union will pay up to $25,000 toward your loan with Listerhill Credit Union, or combination of loans. No loan payments will be made to loans with any other lender. No cash equivalent provided, and the total prize amount may be less depending on the outstanding amount of loan balance(s) with Listerhill Credit Union. In no event will the prize awarded exceed the total amount of the winner’s outstanding balance of qualifying loans with Listerhill Credit Union. Federal, state and local taxes are the sole responsibility of the winner. IRS regulations require the Credit Union file a 1099 on behalf of the winner.

    A Credit Union employee will call the prize winners and the prize winners will be called up to five times during regular business hours at number provided on entry form and will leave no messages. Failure to reach winner during these calls may result in disqualification of winner, forfeiture of his or her interest in all prizes, and selection of a substitute winner drawn from the drum. Winner will be required to schedule a time, at least 48 hours in advance, to visit Listerhill Credit Union, located at 4790 2nd Street, Muscle Shoals AL, 35661 in person, during regular business hours within seven (7) days of being notified to claim prizes by providing proof of eligibility for prize won and completing and signing an affidavit of eligibility and a liability and publicity release. Failure of any Winner to timely contact the Credit Union, visit the above Credit Union office in person and sign and return any required affidavit and release, or to claim a prize or comply with any term or condition of these Official Rules, will result in drawing Winner's disqualification and the forfeiture of his or her interest in the prize. Winners may waive their right to receive prizes. Prizes are non-assignable and nontransferable. No substitutions allowed by winner.

    6. To be eligible to win, all loans must be in good standing (not more than 30 days past due at the time of drawing. Eligible loans are limited to auto loans (no indirect dealer loans), personal loans (no loans secured by real property, such as mortgages, 2nd mortgages, and Home Equity Lines of Credit) and recreation loans made to consumer borrowers (not business or commercial loans).

    6. Participation. By participating, entrants agree to be bound by these Official Rules and the decisions of the Contest. Except where prohibited, acceptance of any prize constitutes winner's consent to the publication of his or her name, biographical information and likeness in any media for any commercial or promotional purpose, without limitation the Internet, or further compensation. Prizes not won and claimed by eligible winners in accordance with these Official Rules will not be awarded and will remain the property of the Credit Union.