Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Refinance an auto loan in Canada

Want to get a better deal on your car loan? Consider these options for refinancing a car loan.

Refinancing an auto loan in Canada can help you save money on your repayments every month by giving you lower interest rates. It can also help you extend your loan term so that your monthly payments become more affordable. Learn about when it might make good financial sense to refinance your car loan and when you might want to stick with your current contract. Also, find out car loan refinancing offers from lenders.

Refinance an auto loan in Canada

Compare offers from the lenders below.

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
Loans Canada Car Loans
$500
0% to 29.99%
3-96 months
300
Min. income of $1,800 /month, 3+ months employed
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.
Car Loans Canada
$7,500
3.99% to 29.95%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
Search thousands of vehicles online, including $0 down options, from dealers across the country and get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
Coast Capital Car Loan
$10,000
Varies
18-84 months
650
Able to service debt payment of $300/month
Finance or lease both new and used vehicles with competitive rates and flexible terms from one of Canada's largest credit unions. No credit union membership required for this product.
Canadian Auto News
$7,500
3.99% to 29.95%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
Answer a few simple questions to get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
LoanConnect Car Loans
$500
9.90% to 46.96%
3-120 months
550
No min. income requirement
Get access to 25+ lenders through LoanConnect's brokerage. Receive pre-approval in as fast as 60 seconds and get your funds in as little as 24 hours.
Fairstone Secured Personal Loan
$5,000
19.99% to 23.99%
36-120 months
560
Established credit history and own your home
Fairstone offers secured personal loans up to $50,000.
loading

Compare up to 4 providers

Top picks for refinancing a car loan

Car Loans Canada logo

Key features: Car Loans Canada mentions deals on its website and takes pride in a simple, transparent car-buying process. Rate starts at 3.99% for a used car. Loan term is 12-84 months. Car Loans Canada is a broker that works with many lenders across Canada, including the major banks.

How to apply: Fill out its online application within minutes. After submitting, a team member will contact you to discuss your application, including rates and terms.

Eligibility requirements: Min. income of $2,000 /month, 3+ months employed, plus a minimum credit score of 300.

Coast Capital logo

Key features: Coast Capital is a reputable credit union who takes pride in offering flexible, low-interest and competitive car loans. Bring your existing car loan to Coast Capital so it can offer you a lower rate or longer term. The interest rate varies based on personal financial factors. Loan term is 18-84 months.

How to apply: Apply online in as little as 10 minutes and get a response on the same business day.

Eligibility requirements: Able to service debt payment of $300/month, minimum credit score of 650.

Go to site

How does refinancing a car loan work in Canada?

Refinancing an auto loan in Canada involves borrowing money to pay off your old car loan. You will typically only want to refinance your car loan if you think you can qualify for better interest rates by doing so. For example, you might want to refinance if your credit score has improved substantially or you’re making a much higher income.

When you decide to refinance, you’ll apply for a new loan with a new lender (or with your current lender if they’re willing to reduce your rates). You can use the money you borrow to pay off your old loan plus any closing costs or early repayment charges. From there, you’ll make regular payments on your new loan and hopefully save some money in the process.

Benefits and drawbacks of auto loan refinancing

Benefits

  • Get lower interest rates. Lock in lower interest rates so that you pay less on your loan over time by refinancing with good credit.
  • Lock in lower monthly payments. Extend your term to lower your monthly payments if you’re struggling to repay your loan.
  • Switch to a different lender. Pick a lender with better customer service or lower rates than your former provider when you refinance your car loan.
  • Get cash back. Get cash back when refinancing an auto loan for a larger amount than what you owe for your car.

Drawbacks

  • Not a good option if you have bad credit. You won’t be able to take advantage of lower interest rates if you have bad credit.
  • Prepayment penalties. You could end up losing money if you get lower rates but have to pay penalties for closing your old loan contract early.
  • Pay more in interest if you extend your term. You could end up paying more in interest if you extend your term (even if your monthly payments are smaller).

When should you refinance a car loan?

You’ll typically only want to refinance your car loan in a couple of situations.

    When should you avoid car loan refinancing?

    You should avoid auto loan refinancing in the following situations:

    How to compare car loan refinancing offers

    You’ll want to compare the following features of your loan to make sure it’s a good fit for you:

    • Loan amount. Make sure that the lender you choose can give you enough money to pay off your current car loan as well as any fees you’ll have to pay for closing early.
    • Interest rates. Double-check that the rates you’ll pay with the new lender are lower than what you’re currently paying to guarantee that you’ll save money in the long run.
    • Fees. Find out what fees your new lender will charge you to set up and maintain your loan as well as what penalties you might incur to pay it off early.
    • Repayment flexibility. Learn more about the lender’s policies for handling late payments or changing repayment dates to accommodate your cash flow.
    • Reputation. Make sure the lender you want to switch to has positive online reviews and a good reputation for customer service.

    Is that new car refinance offer a better deal?

    Use this calculator to compare your existing loan with a potential refinanced loan to see how much you can save over time.

    Can you refinance a car loan with bad credit?

    You can get auto loan refinancing with bad credit, but you’ll want to make sure it’s a smart financial move. This will only be the case if you’ve improved your credit rating since you first applied for your car loan (even if your score is still under 650). It could also make sense to refinance with bad credit if you have a higher income or you’ve paid off significant debts.

    Another reason you might like to refinance with bad credit is if you can’t make your current monthly payments. In this case, you might be able to refinance to get a longer term, which will bring down your costs every month. Just be aware that this means you’ll pay more in interest over time unless you’re also able to secure lower interest rates.

    Can I refinance an auto loan if I’m upside down on that auto loan?

    You typically shouldn’t refinance your car loan if you already owe more than what your car is worth (which is what being upside down on your car loan means). While refinancing a car loan can help if you can lock in lower interest rates, your lender will usually charge you higher rates since your asset won’t cover your loan payments if you default.

    You may want to consider waiting until you’re in a better position to refinance your loan, such as when your payments catch up to the value of your vehicle. You can also consider selling your vehicle or trading it in for a less expensive vehicle and paying the remaining balance that you owe if you just want to get rid of the debt quickly.

    Compare car loan refinancing options

    How to refinance a car loan: a step-by-step guide

    Below are 8 steps that break down how to refinance a car loan in Canada.

    Step 1: Review your current car loan.

    Check your loan statement or log in to your account to find the following information:

    • Monthly repayment
    • Current interest rate
    • Remaining balance
    • Payoff amount
    • Remaining loan term
    • Prepayment penalty, if any
    • Lender’s customer service number

    While you’re reviewing your loan documents, weigh any fees you’ll be charged for paying off your loan early against potential savings from refinancing an auto loan to make sure it’s worth it.

    Step 2: Check the value of your car.

    Your car’s current value will determine how much you need to borrow — and if refinancing your auto loan is a viable option. To get an idea of how much your car may be worth, visit sites the Canadian Black Book or Autotrader.ca. Your vehicle’s make, model, mileage and condition, as well as where you live will all impact its overall value.

    If your car is worth less than the amount you want to borrow, you could end up paying much more for your car than it’s worth. Instead, you might want to consider selling it privately or trading it in at a dealership for a less-expensive alternative.

    Step 3: Check your credit and eligibility.

    Factors like your credit score, debt-to-income (DTI) ratio, current loan amount and vehicle will all play a role in whether your refinancing application is approved.

    Use a free online tool to check your credit score and calculate your DTI ratio to get an idea of lenders you might qualify with.

    Many refinancing providers also have a minimum loan amount they’re willing to refinance, which may be around $5,000 or more. If your current car loan is less than the lender’s minimum, your application won’t be approved.

    In addition, lenders also have limits on the car itself: A vehicle over 10 years old or with more than 100,000 miles will be much more difficult to refinance than a newer vehicle with less mileage.

    Every lender is different, so review its specific eligibility criteria before you apply to avoid a rejection — and an unnecessary hit to your credit score.

    Step 4: Compare your auto loan refinancing options.

    Research lenders that offer car loan refinancing to see what eligibility requirements you’ll need to meet and how much you may be able to borrow.

    When comparing your options, consider the cost, term and how much your monthly repayment will change with your new loan. Compare car loan refinancing options now.

    Step 5: Apply for preapproval.

    Many car loan refinancing providers offer pre-approval, which allows you to see what rates and terms you might qualify for before completing a full application — and taking a hit to your credit score.

    Pre-approval forms are generally available on the lender’s website, and you may know your potential terms within minutes of submitting it.

    What information do I need to refinance my auto loan?

    Every lender has a different process, but most ask for some or all of the following information at some point in the application process:

    Information about yourself
    • Full name
    • Date of birth
    • Email address
    • Phone number
    • Residential address
    • Employment status
    • Driver’s licence
    • Proof of income
    • Proof of citizenship
    • Proof of insurance
    • Social Insurance Number (SIN)
    Information about your vehicle
    • Vehicle identification number (VIN)
    • Current kilometres
    • Vehicle make, model and year

    Information about your loan

    • Your current lender
    • Remaining loan balance
    • Current loan term
    • Amount you want to finance

    Step 6: Review your pre-approval offers.

    After you’ve received a pre-approval offer or two, calculate your new monthly payment to see if you’ll actually save money by refinancing. You should also consider outside factors like perks and discounts to make sure you’re getting the best deal available to you.

    Most importantly, compare your new loan against the terms of your old one. If your previous car loan has a prepayment penalty or if the new car loan has a higher rate, it may not be worth refinancing.

    Step 7: Complete the full application.

    Once you’ve decided on a lender, reach out to submit a full application. If approved, review your new loan documents to make sure you understand the lender’s terms and conditions. Confirm your new payment due date, interest rate, loan term and potential fees. If you agree to the terms, sign your loan documents to finalize the agreement.

    Step 8: Pay off your previous car loan.

    Your new lender will either pay off your old car loan directly or transfer the funds to your account so you can pay it off yourself. Regardless, reach out to your old lender to confirm your payment has been processed and your account has been closed to avoid any headaches down the road.

    How does the coronavirus outbreak affect car loan refinancing?

    You might be able to get a better deal if you waited to refinance your car loan during the coronavirus outbreak. After the Bank of Canada lowered rates to between 2.45% in March 2020, many car loan providers also lowered their rates.

    But you’ll still need to shop around to make sure you’re getting the most competitive rate. And you still need to meet the lender’s requirements — which typically include having good credit and a steady source of income.

    If you’re struggling financially due to COVID-19, see our guide on what to do if you can’t afford your repayments. Contact your lender to discuss your situation. Many providers are offering support for those financially affected by the outbreak.

    Bottom line

    Exploring your options for auto loan refinancing doesn’t have to be a complicated process. As long as you know how to compare new loans against your current loan, you may be able to find a better deal that lowers your interest rate or monthly repayments – or both. Just make sure to consider all of your options and your current financial situation before applying.

    Frequently asked questions

    More guides on Finder

    Ask an Expert

    You must be logged in to post a comment.

    Go to site