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Is It Best To Refinance Your Car With Your Current Lender?

If you have decided that it’s time to refinance your car loan, your first thought may be to go to your current lender and see if you can get approved. 

However, that’s not always the best option available, especially if your lender wouldn’t offer the lowest rates or if you’ve experienced poor customer service. On the other hand, if you trust your current lender, sticking with them may be the right call.

Is It Time To Refinance Your Car Loan?

First of all, it’s important to consider whether it’s even time to refinance your car loan. In some cases, it may be either completely unwarranted or simply unnecessary. When deciding if you should refinance or not, consider these factors:

Your credit

If your credit has improved, you stand a good chance of getting a lower rate if you refinance, ultimately saving on interest in the long term.

Current rates

Likewise, if current market interest rates have declined, you could benefit from refinancing your vehicle.


With higher income—or less debt—comes more ability to pay higher monthly payments. Refinancing to a shorter loan term will likely increase your monthly payment, but you’ll pay the loan off sooner, saving money over time.

Whether you have equity

Is your car worth at least as much as you currently owe on the loan? If not, then you’re unlikely to be approved for refinancing.

Closing costs

If the closing costs on refinancing would be more than you’d save on interest, then refinancing isn’t typically a wise idea.

Age of the vehicle

Older vehicles are less likely to be approved for refinancing than newer ones since there’s a higher chance they’ll end up underwater in the loan.

Reasons To Refinance With Your Current Lender

Sometimes, it is best to refinance with your current lender, particularly if you already have a positive borrower-lender relationship with them.


One good reason why you might want to stick with your current lender is for the sake of continuity. Switching the party who is servicing your loan and receiving payments may cause some inconvenience, and the process may take a little longer.

Existing relationship

Hand in hand with continuity is the fact that you have an existing relationship with your current lender. If it’s a good relationship, then it may be a good idea to refinance your car with them just to maintain it.


You’re already familiar with your current lender, their level of customer service, and typical rates. As such, it may be more comfortable to stay with them, especially if you know that you can trust them.

Reasons To Shop For Lower Rates

While borrowers are often more comfortable—and find it more convenient—to refinance a car loan with their current lender, it’s not always the best in terms of cost savings.

Get the lowest rate possible

Typically, your primary goal with refinancing is to save money. If refinancing with your current lender would yield only minimal savings, you’ll likely want to search for another lending institution. By shopping around and getting quotes from other lenders, it’s possible to get a lower rate than if you stuck with just one lender.

Negotiating power

On top of being able to compare rates from multiple lenders, you also get a great deal of negotiating power. Being able to tell a lender that another institution is offering you a lower rate for refinancing could push them to give you a better offer, especially if you are a borrower in good standing with good credit.

Escape a bad lender-borrower relationship

Finally, if your current lender offers poor or impersonal customer service, then it may be time to switch to a lender that will value you as a borrower. Credit unions can be especially good lenders in this regard since each of their customers is a member of their organization. There’s more incentive to treat you well and to work with you on servicing your car loan.

Additional Considerations

In addition to the above-mentioned reasons to either change lenders or stay with your current one, there are other considerations to take into account. These include the following.

Customer service

Customer service should always be a factor when choosing a lender. This is one of the reasons why many borrowers might stay with the same lender—they already know and trust them, and they know they can rely on them when it comes to refinancing a car loan. 

On the other hand, if your lender doesn’t offer good customer service, it may be time to switch to one who treats their borrowers better.


Change almost always brings with it a certain amount of risk, and changing lenders is no exception. As much as you might read reviews and analyze a new lender’s offerings, you never really know whether they’re a good fit until you try it. Often, that risk is either completely warranted or otherwise minimal, but it’s present either way.

Life circumstances

Another consideration is your life circumstances. 

For instance, if you’re going to be moving to another state, then it may be more cumbersome to have a local bank service your loan, especially if you need to negotiate with them about terms. On the other hand, if there are a lot of other changes going on in your life, it may be simplest to at least let your lender of choice remain consistent.

Credit unions

Finally, when choosing a new institution to refinance your loan, a credit union can be a great choice. Given that those who handle their finances at credit unions are members rather than mere customers, it can create a more solid borrower-lender relationship—one that’s likely to have more positive continuity than might happen at other institutions.

Choosing A Lender For Your Auto Refinance 

If you’ve decided to refinance your car loan, one of the most important choices you have to make is your lender. As we’ve discussed, going with your current lender is beneficial and convenient. But, since one of the greatest advantages of refinancing is a reduced interest rate and better terms, those should be guiding factors as well.

If you’re unsure how a credit union could benefit you, we welcome you to discuss with us whether refinancing your vehicle would be best for your situation.

Learn More About Refinancing Your Car Loan