Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Feb 20, 2012

Advertiser Disclosure

Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.

On an existing auto loan bill, the best way to reduce one’s monthly payments is to refinance. Refinancing a car loan is a process that involves negotiating with a lender, then taking out a new auto loan that covers the balance of an existing one, but at a lower interest rate. And as the auto loan in industry continues to tread far in front of the rest of the financing industry, obtaining one of these refinances is becoming easier and easier.

 

Done are the Days of High Interest Rates

 

Interest rates are being slashed, left and right, in all of the financing fields. Mortgages, for example, have broken record lows nearly ten times in the last year alone. Car loans aren’t far behind, as their interest rates have been dipping to very low levels in an attempt to stimulate purchases. If a current vehicle owner is financing their car at a high rate, they should consider an auto refinance loan.

 

Jessica Hearns, a 23 year old car buyer purchased her vehicle in 2009 when she had very little credit history. As a result, she wound up financing her new automobile at an alarming 19 percent interest rate over five years, reported the Detroit Free Press.

 

Her mother, however, thought such a rate was outrageous.

 

“She said my interest rate was entirely too high,” Hearns explained.

 

So Hearns approached her lender and sought a refinance. She landed an auto loan refinance at 3.5 percent over three years, effectively dropping her monthly bill from $225 to $165—a 26 percent decline.

 

“You save a lot of money, and it’s a great deal,” said Hearns about her refinancing experience.

 

How to Refinance

 

In order to participate in this money-saving technique, there are a few prerequisites:

  • One must usually have an outstanding loan balance of $7,500 to $30,000
  • The vehicle should be less than five years old
  • Borrowers need to have a decent credit score

 

All of these requisites have been established in order to best protect both the lender and borrower.

 

Lenders usually require an outstanding car loan balance of more than $7,500 since it would often not be worth the trouble and fees to refinance a loan.

 

A vehicle that is older than five years often loses its value to a point where a lender would be unwise to back it with a cheaper loan.

 

Finally, borrowers with low credit scores are usually more prone to default than those with better financial history.

 

Borrowers ought to make sure they meet all three of the requirements if they’d like to reduce their monthly payments with an auto refinance loan.