Where to refinance your auto loan

Banks that refinance auto loans fall into three categories: traditional banks where you already have accounts, national banks that specialize in auto lending, and credit unions. Each charges different rates and has different speed and approval standards. Your existing bank is often the fastest route because they already know your payment history, but they may not offer the lowest rate. National lenders like LightStream, Upgrade, and SoFi often undercut traditional banks on rate, though they require a stronger credit profile. Credit unions typically sit in the middle on both rate and speed, and membership is sometimes easier to obtain than people assume.

The bank you choose affects three concrete things: the interest rate you receive, how long approval takes, and whether you can refinance a loan that is underwater (you owe more than the car is worth). A bank offering 4.5% when your current loan is at 7% saves you real money over the remaining term. A bank that approves in two days versus two weeks matters if you need the cash flow change when ready. And a bank willing to refinance a car worth $18,000 when you owe $22,000 opens a door that many lenders will not.

Key Takeaways

  • Your current bank or credit union will approve fastest because they already have your account history, though their rates may be higher than specialized auto lenders.
  • Online lenders like LightStream, Upgrade, and SoFi often offer lower rates but require a credit score above 660 and may take three to five business days to fund.
  • Credit unions typically offer rates between traditional banks and online lenders, and membership often requires only a small deposit or charitable donation.
  • Banks differ on whether they will refinance underwater loans, so check this before explore if you owe more than your car is worth.
  • Prequalification lets you see the rate a bank will offer without a hard credit pull, so compare three to five lenders before committing to an process.

Traditional banks and what they charge

Banks like Chase, Bank of America, Wells Fargo, and regional banks in your state all offer auto refinancing. If you already have a checking or savings account with them, approval is usually fastest—often within one business day—because the bank already has your income and payment history on file. You walk into a branch or call the auto lending department, and they pull your current loan details from the title company or your existing lender.

The trade-off is rate. Traditional banks typically charge 0.5% to 1.5% higher than online lenders for the same credit profile, because they have higher overhead costs and are not competing primarily on rate. A borrower with a 720 credit score might see 5.5% to 6.5% at a traditional bank but 4.5% to 5.5% at an online lender. The difference compounds: on a $20,000 loan over 60 months, that 1% gap costs roughly $1,000 in extra interest. However, if you need the money in two days and your credit is below 660, a traditional bank may be your only option.

Online lenders and credit requirements

Online lenders—LightStream (Discover subsidiary), Upgrade, SoFi, and Earnin—compete primarily on rate and do not require you to be an existing customer. They typically offer rates 0.5% to 1.5% lower than traditional banks for borrowers with credit scores above 680. The process is entirely online, and you upload your loan documents and proof of income through their portal. Approval decisions come within 24 to 48 hours, though funding takes an additional two to three business days because the lender has to contact your current lender and request a payoff quote.

The barrier is credit score and income verification. Most online lenders will not consider applications below 660, and some require 700 or higher. They also verify employment and income more strictly than traditional banks do—expect to provide recent pay stubs, tax returns, or bank statements showing direct deposit. If your credit is below 660 or your income is irregular or self-employed, a traditional bank or credit union is a more realistic path. Prequalification with online lenders is free and uses a soft credit pull, so you can check your rate without damaging your score.

Credit unions and membership requirements

Credit unions typically offer rates between traditional banks and online lenders—usually 0.25% to 0.75% lower than banks but not as low as the best online lenders. The advantage is that credit unions are more flexible on credit score (many will work with scores as low as 620) and are often faster than online lenders because they do not require as much documentation. Approval can happen in one to two business days, and some credit unions will fund the same day.

Membership is the only hurdle, but it is usually smaller than borrowers think. Most credit unions require either a small deposit (often $25 to $100) into a savings account or a donation to a nonprofit that qualifies you for membership. Some credit unions are open to anyone in a geographic area; others require you to work for a specific employer or belong to a specific organization. Start by searching your state's credit union league website or visiting CO-OP, which is a shared branching network that lets you access any participating credit union's services. If you find one you can join, the refinance process is usually simpler than at a bank because credit unions focus on member relationships rather than volume.

Comparing rates across lenders

The only way to know which bank offers the best rate for your situation is to get prequalified with at least three lenders. Prequalification uses a soft credit pull and does not affect your credit score. It takes 10 to 15 minutes per lender and gives you a rate quote that is usually good for 30 to 45 days. Do this before you explore formally, because formal applications use a hard credit pull and multiple hard pulls in a short window (within 14 to 45 days, depending on the credit bureau) count as a single inquiry for scoring purposes.

When you compare quotes, look at the annual percentage rate (APR), not just the interest rate. The APR includes fees the lender charges, so a lender quoting 5.0% APR is cheaper than one quoting 4.9% interest rate plus a $500 origination fee. Also note the loan term they are offering—a 72-month loan will have a lower monthly payment than a 60-month loan at the same rate, but you pay more interest overall. Use an auto loan calculator to convert each quote into a total cost over the full term, then compare.

Underwater loans and lender restrictions

If you owe more than your car is worth, some lenders will not refinance you at all. Others will refinance the full amount you owe but charge a higher rate to cover the risk. A few will refinance only the amount the car is worth and require you to pay the difference out of pocket. This matters because being underwater is common in the first two to three years of a loan, especially if you put down less than 20% at purchase.

Check the lender's policy on underwater loans before you explore. Online lenders and banks usually state this clearly on their website or in prequalification. Credit unions are often more flexible here because they prioritize member relationships. If you are underwater and need to refinance, call your current lender first and ask what your payoff amount is versus the current market value of your car. Then ask potential new lenders directly whether they will refinance the full payoff amount. If they will, the rate may be 0.5% to 1.5% higher than for a borrower with positive equity, but it is still worth comparing to your current rate.

Speed of approval and funding

Approval speed varies by lender type. Traditional banks where you have an account: one to two business days. Credit unions: one to three business days. Online lenders: two to three business days for approval, plus two to three more for funding. The full timeline from process to money in your account is usually two to five business days for a bank, three to five for a credit union, and five to seven for an online lender.

Funding speed matters because the new lender has to contact your current lender, request a payoff quote, and wait for that quote to arrive. Some lenders can expedite this if you provide your current loan number and lender contact information upfront. If you need the refinance to close quickly—because you are facing a rate increase or need to change your payment date—tell the lender this when you explore and ask whether they offer expedited processing. Some do, though it may come with a small fee or a slightly higher rate.

Frequently Asked Questions

Can I refinance with a credit score below 660?

Yes, but your options narrow. Online lenders typically require 660 or higher. Traditional banks and credit unions will often work with scores between 620 and 660, though the rate will be higher. If your score is below 620, a credit union is usually your best bet because they focus on member relationships rather than credit score alone.

What happens if my current lender takes a long time to send the payoff quote?

The new lender will follow up with your current lender, but this can add two to five business days to the timeline. You can speed this up by calling your current lender directly, getting the exact payoff amount, and providing it to the new lender. Some lenders will fund based on your verbal payoff amount and adjust if the actual payoff is slightly different.

Do I have to refinance with my bank if I already have an account there?

No. Your bank may offer a faster approval, but you are not obligated to use them. Compare rates with at least two other lenders before deciding. Your bank's rate may be higher than what you can get elsewhere, and the speed advantage only matters if you need the money in one to two days.

What if I have a cosigner on my current loan—do they need to be on the new loan too?

Not necessarily. Many lenders will refinance based on your credit alone if your score and income are strong enough. Ask the lender during prequalification whether a cosigner is required. If your score is below 660, having a cosigner with good credit can lower your rate or help you get approved.

Can I refinance if I am behind on my current loan payments?

Most lenders will not refinance if you are currently 30 or more days behind. You need to bring the loan current first, then wait 30 to 60 days before explore to refinance. If you are struggling with payments, contact your current lender about a loan modification or payment deferment before pursuing refinancing.