How do you refinance a car?

June 24, 2023 8:14 AM

We ended up with a really crap deal when buying a vehicle last year, because of unexpected credit circumstances, and were advised to refinance in a year after making payments all nice and proper. Now what?

We hadn't bought cars since 2006, at which time my husband had decent credit and I did not, so we bought them in his name. Thanks to a name change that somehow only got reported to the crappiest credit union, when we went to buy another car we found out my husband - in car-financing eyes - has NO credit history and I am a "first-time buyer" at 50. We do not own a home. I financed it alone, as something of a credit weirdo, with "fine" but not "woohoo" credit.

So our interest rate is...bad. "Make payments on time for a year while you at least get Experian fixed, and then refinance," they advised. This is now complete.

We do not have a credit union, and while we are open to putting some money in one for these purposes, we are domiciled in Los Angeles but are traveling and won't be back to that part of the country for probably a year so we don't have "an" address for any length of time, or any other state's residency. Everything we do needs to be really virtual.

I just vaguely understand that credit unions get recommended for buying cars, but do we literally just put some money in a credit union and then ask nicely for a lot more? Are there other ways of getting new financing we should also consider? Should we try talking to the place we got financing from in the first place?

Is this going to suck if we're not back in California for the process? Like is it likely someone's going to need it to be smogged ahead of schedule (next year) or anything? What are all the steps I should be planning for?

(Also, PSA: if you change your name, follow up with all three credit bureaus to be absolutely sure the changes go through. SSN didn't change (and name was changed with Social Security) but if the name doesn't match you don't entirely exist.)

posted by Lyn Never to Work & Money (7 answers total)

When my SO refinanced her car ~10 years ago it was pretty easy as I recall. Call up your bank (assuming they do auto loans) and ask what the process looks like. You don't have to go with them if you don't like the rate, but at least you'll know what the process is in your state.

It varies by state because how title certificates are handled differs wildly between states.
posted by wierdo at 8:18 AM on June 24, 2023

There are online credit unions that do the whole refinance online &don't require you to be in a specific state. The ones I've seen frequently recommended are PenFed (anyone can join) & DCU (multiple ways to join, including via a $15 membership in a partner organization), but I haven't used either one personally. DCU's article on How to Refinance Your Car Loan makes it seem pretty simple.
posted by belladonna at 8:41 AM on June 24, 2023 [5 favorites]

I traveled all around the country and my credit union debit card worked at credit unions all over, generally no charge. I didn't use much cash, though.
Talk to your bank's loan dept.
If you have credit cards with a no interest balance transfer option, typically a year, put some on that. Pay it promptly or you'll get nasty penalties.
posted by theora55 at 8:50 AM on June 24, 2023

I financed my car through a credit union (a local one I was eligible to join through work) and only had to put a token like, five dollars into my (what I guess is a checking) account to be a “member”- I never use them for any other banking and just do the car loan. I never went to the credit union in person and did everything through the phone and email to get the loan, and then handle my payments through their online portal.

Figure out which credit unions you’re eligible for and then see what their websites say about auto refinancing! They’ll likely have a web form or email or phone number for you to contact.
posted by MadamM at 10:59 AM on June 24, 2023

I just vaguely understand that credit unions get recommended for buying cars, but do we literally just put some money in a credit union and then ask nicely for a lot more?

Credit unions are structured as co-operatives, where the members own the corporation and every member gets exactly one share, so that one share one vote translates to a nicely democratic one person one vote. The "some money you put in" to join a credit union is just the cost of your single share. Once you're a member (i.e. a part-owner) you become somebody the credit union can lend money to; there's no requirement or expectation that you need to do your savings there as well (though you certainly can, and will almost certainly find that both their interest rate and their customer service is better than your present bank's).

In your shoes I would definitely be going the credit union route, and I would start by calling my local credit unions to find out what loans they have available for the kind of financing you need.
posted by flabdablet at 11:14 AM on June 24, 2023 [1 favorite]

A large number of credit unions are part of the Co-Op Network, which allows you to access most banking services from any participating credit union, and these days the majority of banking can be handled via the website or telephone; I've visited a branch maybe twice in the last 5 years. Also, the credit union or bank only really cares about the car being insured and that the payments on the loan are going through.

You may need to jump through some hoops around smogging your car in order to get tabs if you're traveling out of state, but that will be the case regardless of who's handling your car loan. I'd check with the DMV about your travel situation, as I don't see anything about it in their smog inspection FAQ. It'd suck to get pulled over due to expired tags in another state, and its possible there are insurance repercussions for doing so, so I'd get on that soon.
posted by Aleyn at 12:35 PM on June 24, 2023

Talk to a finance broker. They can give you all the options, as well as give you advice (if you need it) about any hidden costs in paying out your existing loan early. A lot of lenders that deal in 'risky' loans protect themselves by not only charging high interest rates, but by having extortionate 'exit fees' that often mean it's cheaper just to keep paying the loan than to refinance.

Refinancing a loan is an everyday task for lenders though, so it's nothing to stress about.
posted by dg at 4:32 PM on June 25, 2023