Refinancing can be a smart financial move under the right circumstances.  Here are the top reasons why someone might choose to refinance a car or recreational vehicle loan:

LOWER INTEREST RATE
Why it matters: If interest rates have dropped or your credit score has improved since you got the original loan, refinancing could lower your rate.
Benefit: You’ll pay less in interest over the life of the loan, potentially saving hundreds or thousands of dollars.

LOWER MONTHLY PAYMENTS
Why it matters: Refinancing can stretch the loan over a longer term.
Benefit: Reduces your monthly financial burden, freeing up cash for other expenses. (Note: This may increase total interest paid.)

SHORTEN THE LOAN TERM
Why it matters: If your financial situation has improved, you might want to pay off the loan faster.
Benefit: Saves on interest and gets you out of debt sooner.

IMPROVE CASH FLOW
Why it matters: Reducing your monthly payments can provide breathing room in your budget.
Benefit: More flexibility with your finances, especially if you're dealing with other debts or unexpected expenses.

REMOVE A COSIGNER
Why it matters: If you originally needed a co-signer and now qualify on your own, refinancing allows you to remove them.
Benefit: Gives the co-signer financial relief and improves your independence.

 

SWITCH LENDERS
Why it matters: You might be unhappy with your current lender's service or want better terms elsewhere.
Benefit: Potentially better customer service, more flexibility, or access to other financial products.

YOU'RE UNDERWATER ON YOUR LOAN
Why it matters: You owe more than the car is worth.
Benefit: Some lenders may offer refinancing options to help manage negative equity more affordably.

AVOID REPOSSESSION OR DEFAULT
Why it matters: If you're struggling to make payments, refinancing could prevent default.
Benefit: Protects your credit score and helps you keep the vehicle.

 

• Prepayment penalties on your current loan are high
• You're near the end of your current loan term
• The value of the car is too low or too old
• You don’t qualify for better terms due to credit issues

Here’s a handy calculator from Banzai you can use to see if refinancing can help you reduce your monthly payment and how much the refinanced loan could cost over time.