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Can You Refinance a Car Loan With the Same Bank?

Marcus Personal Loan 2022 Reviews

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Although paperwork and credit checks are a drag, it’s often beneficial to refinance your car as interest rates change. If you’re currently considering refinancing your vehicle, you may be wondering if you can refinance a car loan with the same bank. Yes, you’re able to refinance your car with your current lender, but as is the case with any car loan, your credit score and the age/condition of the vehicle will play a huge role in your ability to refinance a car loan.

Read on to find out when it’s a good idea to refinance — and also when it’s not — and how to go about refinancing your car loan with the same bank.

What Does Refinancing Mean?

Refinancing a car loan refers to the process of replacing your old car loan with a new one. Your new car loan will have different terms and rates than the old one. Basically, when you’re refinancing a car loan, you take out a new loan to pay off the original. Obviously, you would only refinance your car if doing so can save you money or is beneficial to you in some other way.

Reasons To Refinance a Car

There are a few different reasons why you may choose to refinance your car. Here are some examples:

Loan Rates Have Dropped

If U.S. consumer loan rates have dropped since you took out your car loan, refinancing your loan will be the sensible thing to do. Refinancing your vehicle when loan rates have dropped is a great way to secure a lower interest rate on your loan. Even a small change in rates can save you a significant amount of money in the long run.

Your Credit Score Has Improved

Your credit score is one of the most important factors when it comes to determining the interest you’ll be paying on your loan. Lenders look at your credit score — which is affected by factors like your payment history, credit history length, and negative remarks — to gauge how reliable you are when it comes to paying off debt. If, for instance, your credit wasn’t in a good shape when you took out your initial car loan, but your credit score has since improved, you may be able to secure a lower interest rate on your loan by refinancing it.

Your Financial Situation Has Changed

Sometimes unfortunate events, such as the loss of a job or unforeseen expenses, can place you in a precarious position where you cannot afford your monthly loan payments anymore. Instead of defaulting on your monthly payments, you can refinance your loan to modify your loan terms, in this way reducing your monthly installments to an amount that you can afford.

You Want To Shorten the Loan Term

On the flip side, your financial circumstances may have improved. Perhaps you have been promoted or received a lump sum of cash. In such instances, you can refinance your vehicle to shorten your loan term, which will decrease the interest due on your loan. You may especially want to look at refinancing in the event that you need to pay penalties for paying off your current loan early.

Refinancing With the Same Bank

In most instances, you will be able to refinance with the same bank, unless your particular bank doesn’t allow this service. In general, a lender would want to retain your loan since it’s a source of income for them.

If you’ve had a good experience so far with the lender, it may be sensible to refinance through them. Although there will still be paperwork to complete, it is usually easier to refinance with the same bank. They already have your information, such as your income and payment history, on file. That said, you should still shop around to compare the rates, fees, and loan terms of other lenders before you refinance with your bank.

How To Refinance With the Same Bank

Since your current bank will already have your personal details on file, applying for refinancing through them will require less paperwork than if you applied through a new lender. However, you’ll have to resubmit your financial information, which includes your proof of income and tax returns. Your bank will also ask you to confirm your personal information, such as your address and marital status.

Lastly, the bank will pull your credit reports, which will likely have a negligible effect on your credit score. After the bank has collected all the necessary information, you’ll receive a new loan offer from them. At this point, it may be a good idea to shop around a bit to see what other lenders offer. To avoid a negative impact on your credit score, aim to apply for refinancing with other lenders within a 14-day period. As long as your last credit check takes place within 14 days of the first check, your credit score won’t be negatively affected.

When Not To Look at Refinancing

While it’s often a wise move to refinance your car, refinancing is not always a good idea or even possible. Here are a few occasions you might want to keep your current loan:

You’re Upside-Down on Your Loan

If you currently owe more on your vehicle than it’s worth, it’s not a good time to refinance. When you have negative equity (or you’re upside-down/underwater on your loan), you’re bound to receive high interest rates when you try to take out a new loan, or you may not be able to get a new loan at all.

Prepayment Penalties

Another situation in which you may not want to refinance is if your current loan includes prepayment penalties. If this is the case, you’ll have to calculate whether a new loan with lower interest rates will still be worth your while after you’ve paid the current loan’s prepayment penalties. Your bank may also decide to include those charges into your new loan, in which case you’ll still need to calculate how much you’ll actually save at the end of the day.

You Recently Took Out Your Current Loan

It’s important to remember that your credit score is negatively affected when you take out a loan. If you’ve taken out your current loan within the last six months, you should wait for a while so that your credit score can recover before you apply for a new loan.

Although you can typically refinance a car loan with the same bank, it’s sensible to shop around to see which lender can offer you the most agreeable terms and rates before you make a decision.

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.


About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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