Car loans · Elgin Auto Sales & Service Center · Elgin, IL
How to Refinance a Car Loan
Refinancing replaces your current auto loan with a new one, ideally at a lower interest rate. These steps follow the Consumer Financial Protection Bureau's auto loan guidance: what refinancing can do, what it can cost, and how to compare offers.
Lower ratea common reason to refinance
Payoffthe old loan is prepaid in full
14 to 45 daysshop lenders inside this window
Total costcompare more than the payment
The short answer
Refinancing means a new lender pays off your current auto loan and you repay the new loan instead. The CFPB says that if your loan has a high interest rate, you may be able to refinance to a lower interest rate and monthly payment. Because the original loan must be prepaid in full, check your contract for a prepayment penalty first. Then get quotes from several lenders within a short window, and compare the APR, the amount financed, the loan length and the total cost, not just the monthly payment.
When refinancing a car loan can help
Your rate is high. The CFPB says that if your loan has a high interest rate, you may later be able to refinance it to a lower interest rate and monthly payment.
Your credit has improved. The CFPB says your credit report and scores are some of the most important factors in the rates a lender will offer you, and that in general, the lower your credit score, the more likely you are to receive a higher interest rate. If your credit is stronger than when you first borrowed, new quotes may reflect that.
You are having trouble making payments. Among its options for getting an auto loan back on track, the CFPB lists talking with different lenders about refinancing your existing loan to get a lower interest rate or to spread your payments over more time. It also says to contact your current lender or servicer as soon as you know you cannot make a payment, to ask what options are available.
From Can I prepay my loan at any time without penalty? (Ask CFPB), What should I know before I shop for a car or auto loan? (Ask CFPB) and What should I do if I can't make my car payments? (Ask CFPB), read November 9, 2026.
Steps to refinance a car loan
These steps are drawn from the CFPB's auto loan answers:
| Step | What to do | Why, per the CFPB |
|---|---|---|
| 1. Read your contract | Check whether your current loan has a prepayment penalty clause. | When you refinance, you must prepay the original loan in full, and you may incur a fee if your agreement has a prepayment penalty. |
| 2. Get your payoff amount | Ask your lender or servicer for the payoff amount, not just the balance. | The payoff amount can differ from the balance on your statement because of how interest is calculated, outstanding late fees or charges, or another reason. |
| 3. Check your credit reports | Get your free reports and dispute any errors. | Errors may be affecting your credit score and keeping you from the best rates. |
| 4. Shop several lenders | Get quotes from banks, credit unions and other lenders. | Keep credit inquiries within 14 to 45 days of each other so they count as only one inquiry. |
| 5. Compare total cost | Line up the amount financed, APR and interest rate, loan length and monthly payment. | Other factors have more impact than the monthly payment on what you pay over the life of the loan. |
| 6. Confirm the old loan is paid | After the new loan closes, check with your old lender. | For a loan paid off through a new loan, the CFPB suggests waiting one week and contacting the old lender to check that it has been paid off. |
From Can I prepay my loan at any time without penalty? (Ask CFPB), Should I trade in my car if it's not paid off? (Ask CFPB), What should I know before I shop for a car or auto loan? (Ask CFPB) and How do I compare auto loan offers? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026. Step 6 applies the CFPB's advice for confirming an old loan was paid off after a trade-in.
Prepayment penalties and refinancing
The CFPB says prepayment penalties are generally used to discourage you from paying off a loan early, because an early payoff reduces the interest the lender collects. Your contract and state law determine whether you can pay off your auto loan early without a penalty, and some states prohibit prepayment penalties for certain loans.
If you already have a loan you would like to pay off early, the CFPB says to check your contract for a prepayment penalty clause and to check your state law to see whether it is prohibited. Your loan paperwork should also tell you whether there is a penalty if you pay off the loan early. When you shop for the new loan, ask whether it has a prepayment penalty too; if it does, the CFPB says you can negotiate to have it removed or ask for a different loan.
From Can I prepay my loan at any time without penalty? (Ask CFPB) and How do I know who my auto loan lender or servicer is? (Ask CFPB), read November 9, 2026.
Watch the loan length
A refinance can lower your payment by lowering the rate, by stretching the loan over more time, or both. The CFPB cautions that a longer loan term may mean cheaper monthly payments but more interest over the life of your loan.
In its comparison of loan terms, the CFPB shows that the same loan at the same rate costs more than twice as much in total interest over six years as over three. It notes that some financial experts recommend an auto loan of five years or less, and that longer loans are more likely to leave you owing more than the vehicle is worth. Read what negative equity is and APR vs. interest rate.
From What should I do if I can't make my car payments? (Ask CFPB) and How do I compare auto loan offers? (Ask CFPB), read November 9, 2026.
Before you sign the new loan
The federal Truth-in-Lending Act requires lenders to give you disclosures before you sign that explain the loan's costs and terms, including the APR, the finance charge, the amount financed and the total of payments. The CFPB says the disclosures also show the number of payments, late fees and whether you can prepay the loan without a penalty.
You can ask for the disclosures before you sign so you have time to review them and confirm they match the rate you were quoted. The CFPB says you should receive a fully filled-in form, not a blank one, and that if you feel uncomfortable or pressured into signing, you can always walk away.
From What is a Truth-in-Lending disclosure for an auto loan? (Ask CFPB), read November 9, 2026.
Financing a used car at Elgin Auto Sales & Service Center
Shopping for your next vehicle? Browse our used inventory, see our financing options, start a finance application, or get a value with our trade-in form.
Our sales department at 1200 E. Chicago St. in Elgin is open Monday to Friday 9 a.m. to 7 p.m. and Saturday 9 a.m. to 6 p.m., and is closed Sunday. Get directions.
How to refinance a car loan FAQ
What does it mean to refinance a car loan?
A new loan pays off your current auto loan in full, and you repay the new loan instead. The CFPB says that if your loan has a high interest rate, you may be able to refinance to a lower interest rate and monthly payment.
Is there a fee to refinance a car loan?
Possibly. Because refinancing prepays the original loan in full, the CFPB says you may incur a fee if your current agreement has a prepayment penalty. Check your contract and your state law.
Will shopping for a refinance hurt my credit?
The CFPB says multiple credit checks can affect your score, but keeping inquiries within 14 to 45 days of each other means they are counted as only one inquiry.
Should I choose a longer loan to lower my payment?
The CFPB cautions that a longer term may mean cheaper monthly payments but more interest over the life of the loan, and that longer loans are more likely to leave you owing more than the vehicle is worth.
What is a payoff amount?
The amount remaining on your existing loan. The CFPB says it can differ from the balance on your statement because of how interest is calculated, outstanding late fees or charges, or another reason.
What are your sales hours?
Monday to Friday 9 a.m. to 7 p.m. and Saturday 9 a.m. to 6 p.m. We are closed Sunday.
Shopping for your next car?
Visit us at 1200 E. Chicago St. in Elgin.
Sources
Refinancing, prepayment penalty, payoff, credit-shopping, loan-length and Truth-in-Lending guidance are from the Consumer Financial Protection Bureau's Ask CFPB auto loan answers, read November 9, 2026. This is general information, not financial or legal advice. Our address, sales and service hours are from our own website, checked the same day. Photo is of our dealership.
- Can I prepay my loan at any time without penalty? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026
- What should I do if I can't make my car payments? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026
- What should I know before I shop for a car or auto loan? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026
- How do I compare auto loan offers? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026
- Should I trade in my car if it's not paid off? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026
- What is a Truth-in-Lending disclosure for an auto loan? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026
- How do I know who my auto loan lender or servicer is? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026
- Home page: address and sales hours, Elgin Auto Sales & Service Center