Learn about auto refinance loans

Make auto refinance loans work for you

The good thing about refinancing a car loan is that it's a lot less painful than refinancing a mortgage. There's no appraisal and often no fees are involved.

But auto refinance loans aren't for everybody. If you owe more than the car is worth -- typical of recent new car purchases -- your lender probably won't let you refinance. If you're in that situation, use savings to pay the difference, then refinance.

Here are a few situations in which auto refinance loans make a lot of sense:

• Interest rates have dropped. If rates have fallen more than a couple of points since you bought your car, you could save some money. The problem is that auto refinance loans are considered used-car loans, so rates are usually higher than on new-car loans.
• Your credit score has risen. If you had some negative items on your credit report or didn't have much of a credit history when you bought your car, a refinance might be a good idea. If you log several months of on-time payments on the loan, you could entice the lender to offer you a lower rate.
• You didn't get a great rate when you bought the car. If you financed through the dealer, you probably didn't get the best rate. That's because financing is another source of income for dealers, like extended warranties.

If you're ready to pursue an auto refinance, it's often best to start with your current lender. They might convert your loan to a lower rate at little or no cost.

If you can't refinance your auto loan, you could get another loan, such as a home equity loan, to pay off your current car loan. Just make sure the new loan has a lower rate, longer term or both.

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