Do You Qualify to Refinance Your Vehicle?

Author Image
by Julia Guardione

Some people may avoid applying for auto refinancing because they are uncertain about whether or not they qualify. However, getting approved for a new auto loan might not be as difficult as you think.

A common misconception is that credit score is king — that it is the main determining factor for loan approvals, offers, and terms. Though credit matters, it’s not the only factor lenders consider.

These misconceptions can lead to hesitation, which can lead to missing out on thousands in potential refinance savings.

Rather than letting your uncertainty get the best of you, understanding lenders’ key considerations in loan decisions should make you feel more comfortable about applying to refinance.

2021 Auto Refinance Rates See Today's Rates

Are You Over 18 and a United States Citizen?

Though we never want to exclude people, most lenders in our network have these two basic requirements — age and citizenship — for their auto refinance loans.

Is Your Car New-ish?

Though it’s true that most lenders do prefer newer models, it might not be for the reason you think. It’s all about LTV, or loan-to-value ratios. The values of newer cars tend to match the loan amount, as they’ve had less time to depreciate while their associated loans accrue interest.

Typically, older cars with higher interest rates have the least desirable LTV ratios. Put another way, new-ish cars or models with high resale value take longer to be “upside down” in their loan.

However, lenders do not expect to only encounter brand new vehicles with positive LTVs. In fact, most lenders in our network accept a wide range of vehicles ages and have a forgiving threshold for upside down LTVs.

Below is a list of the minimum criteria your car needs to qualify for refinancing. Keep in mind, however, that some models, even if they meet this criteria, may still have LTVs that exceed lender maximums. 

Auto Refinance Eligibility Requirements

Do You Have Decent Credit?

No, perfect credit isn’t a requirement. No, credit isn’t the only factor lenders consider. If you have minimal missed or late payment history, keep your revolving debt relatively low, and manage how often you apply for credit, you should be within acceptable credit range for more lenders in our network.

Lower credit won’t necessarily prevent you from refinancing. Other factors (the other items on this list) are weight into these decisions.

Auto Refinance Calculator Calculate Your Savings

Are You Relatively Financially Stable?

Lenders always assess risk when determining whether or not to loan money. It’s the reason why they assess all of the factors that they do — they want to ensure that they’ll be paid back.

Think about your finances: weigh your income, other debts and financial responsibilities, and your auto loan. This calculation, called a DTI, or debt-to-income ratio, is important for lenders because it determines your financial ability to handle the loan payments.

Of course, a general rule is that less debt is more, but most Americans carry a considerable amount of household debt (it’s an average of about $134,000 including mortgages). Lenders understand this, which is why they typically accept a range of DTI risk.

In addition to your DTI, many lenders like to see stability in lifestyle. They appreciate when borrowers have lived in the same home and worked in the same job for extended periods of time, as it shows financial consistency. Though this is certainly not a deal breaker. Lenders understand that change is inherent to life, though some lenders may simply ask for more documentation in order to determine a borrower’s lifestyle stability.

Things to Remember

  • Perfect credit isn’t necessary, and credit isn’t the only factor lenders consider.
  • None of these factors are more important than the other.
  • Because we work with a variety of lenders with different requirements, it’s likely that even if you don’t have the perfect financial situation or the newest car, we may still be able to find you an offer.

As Wayne Gretzky said, “you miss 100% of the shots you don’t take.” Why miss out on thousands on potential savings for fear of non-approval?

Ready to refinance your car loan? Find a Better Loan Now

About The Author


Julia Guardione

Julia Guardione is an auto refinance writer based in Austin, Texas. She is a graduate of Texas State University and a lover of all things outdoors.


Read More

by Cristy S. Lynch

Auto Refinance Rate Report: April 2021

The average auto refinance interest rate inched up by just a handful of basis points, climbing from 6.23% to 6.42%. But according to RateGenius.com data, applicants with credit scores of 750+ are getting rates under 3% on average. The monthly Auto Refinance Rate Report is an analysis of anonymized…

by Carter Kilmann

The Top 10 Cities for Auto Refinance Savings

Spending too much on your car loan? These cities offered the best auto refinance savings last year. 2020 was a tough year. The COVID-19 pandemic flipped life upside down and dealt a major blow to the economy, leading to historically low interest rates. To maximize savings during a difficult…

by Daniel Mattia

Vehicle Service Contracts vs. Car Insurance: Which Do You Need and When?

Vehicle service contracts and car insurance both provide coverage, but coverage isn’t one-size-fits-all. There are few things worse than hopping behind the wheel, turning the key to your ignition, and seeing your dashboard light up with a stomach-dropping panel of warnings: The check engine, low oil pressure, or ABS…

review review

Customer Reviews

Read our 12586 Certified Reviews

4.9

READ OUR REVIEWS
apply now apply now

Apply Now

Lower your interest rate and drop monthly payments by an average of $83*/month!


GET STARTED