When Should I Refinance My Car Loan?

First Republic Bank
January 6, 2022

The steady decline of interest rates across the auto loan market over the last year, and the opportunity to cut down your monthly car payment, likely has you thinking about refinancing your current auto loan. Even if your current payments are well within your means, you may be evaluating any number of available financing options to help you balance your auto needs with your other financial goals.

Fortunately, there are flexible financing tools that can be used to refinance your car while providing access to funds for other expenses — including personal lines of credit and personal loans.

While comparing the different lenders and refinancing solutions is critical, figuring out when to refinance your car loan is equally important.

In this article, we will go through the key benefits and considerations to keep in mind before you begin the process of refinancing your car loan.

Benefits of refinancing a car loan

As you begin researching your auto loan refinancing options, you can generally focus on the following three benefits:  

  • Lower interest rates: Based on the terms of your new lender, you may be able to secure a better interest rate when refinancing your car loan.
  • Lower monthly payment: Having lower monthly payments can offer you the flexibility to focus on other financial needs beyond your auto loan.
  • Flexible payment terms: Depending on your new lender, you may take advantage of flexible payment terms that may better suit your financial goals.

While each of these factors may vary based on your individual financial circumstances, they can help guide you as you research lenders and decide on the right time to start the refinancing process.

Factors to consider before refinancing your car loan

As you evaluate lenders and available financial solutions to refinance your auto loan, it’s important to consider these variables:

  • Interest rates: If refinancing could offer you lower interest rates so you’re paying less in the long run, it might be time to make the leap. When comparing your options, make sure you understand the difference between APR and interest rates.
  • Creditworthiness: An excellent credit score, along with a history of making timely payments on your original loan, shows potential lenders that you are reliable and trustworthy, which may allow you to access favorable rates and loan terms.
  • Income: If you’ve recently experienced a change in income, you may benefit from lower monthly payments and/or more favorable loan terms.
  • Prepayment penalties: Make sure to check with your lender for any prepayment penalties or other loan fees.
  • Other financial goals: If you have multiple loans in addition to your car loan, you may benefit from combining them all into one single monthly payment by refinancing with a personal line of credit. 

Final thoughts

When it comes to making a large financial decision, timing can be everything. As you evaluate your options, it’s crucial to thoroughly weigh the pros and cons of each solution before initiating your car refinancing process. The considerations outlined in this article can help you take stock of your current financial situation and determine the best time to refinance your car loan.

How can First Republic help?

First Republic's Personal Line of Credit is a flexible line of credit that can help you address a range of financial needs – including buying or refinancing a car, refinancing student loans, funding minor home improvements and much more.

First Republic’s Personal Line of Credit offers access to revolving credit during a two-year interest-only draw period with no origination or prepayment fees.

Unlike a traditional auto loan, Personal Line of Credit is an unsecured loan. That means, you own the title of your vehicle and aren’t required to add First Republic Bank as a lienholder on your vehicle’s title.

Note: If you are looking to purchase a car using our Personal Line of Credit (versus refinancing an existing auto loan), we suggest you obtain the Personal Line of Credit first, before making the final purchase at the dealership.

Curious what a Personal Line of Credit would look like for you? See your available rate and term options using this personal line of credit calculator.

1. Annual Percentage Rate. Rates effective as of 1/4/2022 and are subject to change.

Borrower must open a First Republic ATM Rebate Checking account (“Account”). Terms and conditions apply to the Account. If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: 1) 2.00% for maintaining automatic payments and direct deposit with the Account, 2) 0.50% for depositing and maintaining a deposit balance of at least 10% of the approved loan amount into the Account, and 3) an additional 0.25% for depositing and maintaining a deposit balance of at least 20% of the approved loan amount into the Account.

Minimum $500 to open an ATM Rebate Checking account. A monthly fee (currently $25) will apply if a minimum monthly average balance of $3,500 is not maintained. Foreign currency conversion and other usage fees vary by country and network and are not included in the rebated ATM access fees. If we cannot determine the ATM access fee for a specific transaction, a default rebate amount will be applied.

Personal Line of Credit consists of a two-year, interest-only, revolving draw period followed by a fully amortizing repayment period of the remainder of the term. Draws are not permitted during the repayment period. Full terms of 7, 10 and 15 years available.

This product can only be used for personal, family or household purposes. It cannot be used for the following (among other prohibitions): to refinance or pay any First Republic loans or lines of credit, to purchase securities or investment products (including margin stock), for speculative purposes, for business or commercial uses, or for the direct payment of post-secondary educational expenses. This product cannot be used to pay off credit card debt at origination.

Personal Line of Credit minimum is $65,000; maximum is the lesser of $350,000 or debt to be repaid at origination plus $100,000. If no debt to be repaid at origination, the maximum loan amount is $100,000. Line of credit cannot be fully drawn at origination.

The terms of this product may differ from terms of your current loan(s) that are being paid off, including but not limited to student loans. By repaying such loans, you may permanently be giving up tax and repayment benefits, including forbearance, deferment and forgiveness, and you may not be able to re-obtain such benefits if this loan is refinanced with another lender in the future.

Contact your legal, tax and financial advisors for advice on deciding whether this is the right product for you. Terms and conditions apply.

Product is not available in all markets. For a complete list of locations, visit firstrepublic.com/locations. Applicants must meet a First Republic banker to open account. This is not a commitment to lend; all lending is subject to First Republic’s underwriting standards. Applicants should discuss line of credit terms, conditions and account details with their banker.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document.

This information is governed by our Terms and Conditions of use.