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All About State Farm Auto Refinance

REFINANCE word written in cube with toy car in white background, trade car for cash concept

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Part of responsible car ownership is ensuring that you have the right budget to work with and knowing how to adjust your budget when you need more time or want to pay your vehicle loan off faster. Refinancing your auto loan when you are with State Farm is great option to help you manage your monthly bills and ensure you are getting the best deal possible. Learn about what refinancing an auto loan is, when you may want to refinance your auto loan with State Farm, and what documents you might need when going through the refinancing process.

What Is Refinancing an Auto Loan?

Refinancing your car simply means replacing your previous auto loan with a new one. As people reevaluate their monthly or yearly budgets, they often find it beneficial to find new ways to save money while paying off loans quickly. The new loan pays off the old one, and payments begin on the new one. The application process for refinancing is typically faster than an original loan application, and many lenders can make a determination fairly quickly.

When To Consider a State Farm Auto Refinance

It is a good idea to consider a State Farm auto refinance when you find a cost advantage and benefit. Some instances to consider an auto refinance include:

  • A high current interest rate: Sometimes when people make an initial purchase, they don’t always qualify for the best rates. Many times during the course of an auto loan, credit scores increase. This could make refinancing a way to save money. In some cases, the lower rate can be applied to the balance decreasing the overall cost.
  • Lower monthly payments: Some individuals apply for an auto loan refinance because they need lower monthly payments. A lower interest rate can noticeably decrease monthly payments without increasing the term of the loan.
  • Paying off the loan quickly: In some cases, car owners want to pay off the car quicker. Qualifying for a lower rate can decrease the length of the loan if payments are still made at a higher rate. Making monthly payments that exceed the minimum balance due can help pay off the loan faster because more of the payment is applied to the principal.

Things to Keep in Mind

Although refinancing can be a great option for many car owners, there are some other items to consider.

  • Age of the vehicle: Typically, the newer the vehicle the better. As vehicles age, they depreciate in value. To lenders, older cars have lower collateral value, and so an option to refinance the loan balance may not be available if the amount owed exceeds the vehicle’s current value.
  • Possible prepayment penalties: In some instances, current lenders will change penalty fees for paying off a loan early. The penalty fee serves as an incentive for borrowers to pay off their principal balance slowly over time rather than sooner. This tactic allows lenders to collect on interest.
  • Separate fees: There are sometimes other fees that are associated with paying off your vehicle. These include things such as state re-registration fees. Consider checking with the state the vehicle is registered in to make sure that refinancing is a viable option and an economical one. New lenders also charge separate fees for refinancing, so it is best that all additional taxes and fees are accounted for before any papers are signed.

Documents You Might Need to Refinance

Once the decision to refinance has been made, there are specific documents that most lenders require. While some lenders will have an online portal where borrowers can complete the process without ever leaving their home, others may require an in-person meeting. To help the process run as smoothly and as quickly as possible, collect the following documents beforehand to verify your identity and to ensure the process is not delayed:

  • Current proof of employment
  • Valid source of income
  • Proof of residence
  • Current proof of insurance
  • Credit history
  • Valid state issued identification card or driver’s license
  • Vehicle information such as make, model, year, and identification number
  • Existing car loan details and paperwork

Once the process is completed, the lender will provide the terms of the loan offered and the interest rate. At this point, borrowers can review their options, compare and contrast the terms of the loans, and decide which one is best.


Consider the following tips when refinancing a car loan.

Look for the Best Options

Refinancing a vehicle is a contractual agreement. Be sure you are getting the best interest rate possible and ask for any discounts to be applied. Because lenders want their money working for them, they are often willing to help you find the best options available to keep your business. It is often best to refinance with the current lender, especially if the account is in good standing. Keep up with monthly car payments and protect your credit by periodically reviewing your credit score. Take care of any erroneous information and challenge any activity that is suspicious.

Consider the Separate Fees

There is a lot of information to absorb when refinancing a vehicle. Take time to read the terms and conditions carefully. Fees may impact the overall savings. Things such as prepayment penalties and origination fees can dwindle down potential savings.

Note How Your Credit Score Will Be Affected

Applying for credit entails a hard inquiry into your credit history. Hard inquiries can reduce an overall credit score by a few points. Applying for a new loan during the refinancing process lowers the average age of the accounts and can also lower a credit score. However, the most important factor in determining a credit score is payment history. Making payments on time on a loan will improve a credit score immensely, and have a positive impact on a credit score and finances in the long run.

Check With Your Current Lender

Refinancing with a current lender is often a great option, especially if there is an established history of on-time payments. An established relationship with a lender often results in a better rate and can make the process of refinancing faster. Many lenders offer loyalty programs and discounts and are willing to work with individuals who are working to improve their credit score and overall spending power.

Before committing to a new loan, evaluate all options. A State Farm auto refinance loan often comes with a “Payout Protector” which is beneficial if a car is totaled. State Farm will typically finance a vehicle for $5,000 all the way up to $250,000. The amount depends on the borrower’s credit history among other factors.

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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