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Should I Refinance My Car Loan?

Refinancing with Pearl Hawaii Federal Credit Union could help you lower your monthly car payment by getting a better interest rate or changing how long you pay your loan (the term). Ultimately, you can choose the best options for your budget. We have competitive rates to meet your needs.

What Is Refinancing? 

Refinancing a car loan means getting a new loan to pay off and replace your current one. All vehicle loans have two main parts that you pay – the principle (the amount you purchased the vehicle for) and the interest (the amount you pay the financial institution to borrow money). When you refinance your auto, you usually receive a lower interest rate or choose a different repayment plan in order to make the payments affordable to you. Completing an application for refinancing a car often takes a few minutes and many lenders return a loan decision immediately.

The reasons for refinancing your vehicles vary. If your credit has improved since you took out your initial loan then it is a good idea to refinance to a lower interest rate.  Overall, refinancing can help you lower your interest rate and reduce the total amount of interest you pay. If you’re struggling to make monthly car payments, refinancing can also decrease your payments.


First, review your existing auto loan. Contact where your current auto loan is held and gather the following information:

  • Annual Percentage Rate (APR) of your current loan.
  • Number of months left to repay your current loan.
  • Amount of your current monthly payment.
  • The amount to pay off your existing loan. The Payoff amount is not always the same as the remaining loan balance so make sure you clarify with the person you talk to.

Next, check your credit. You can get a free credit report yearly from the Annual Credit Report website at or by calling 1-877-322-8228 where you will go through a simple verification process over the phone. It is important that you obtain and review a copy of your credit report once a year to make sure your information is accurate.

The information you need for refinancing and the application process varies by lender. The majority of lenders will request the following information:

  • Your driver’s license.
  • Vehicle registration.
  • Proof of insurance.
  • The vehicle identification number, or VIN, of your car.
  • Pay stubs from your current employer or proof of employment. If your are self-employed, you can also use your taxes for verification.

How Does Auto Loan Refinancing Work?

Refinancing your auto loan replaces your current loan with a new loan. Typically, the new loan will have a lower interest rate, different term, or smaller monthly car payment. You can keep the length of the loan the same as the number of months left on your current loan or you may be able to shorten or extend – dependent on your life situation and needs.

Should I Refinance My Car Loan?

Refinancing your car loan makes sense if rates have dropped, you are having trouble making payments, or your credit has improved. Overall, refinancing your car loan could be a great way to get a lower interest rate that saves you money monthly and over the life of your loan—often without extending your term length.

Interest rates drop due to a variety of reasons. Either the economy has changed or there is increased competition in the marketplace. If rates are lower now, refinancing your car loan could help you pay off your loan sooner or save you money on interest.

Another reason to refinance your car loan includes if paying your monthly payment is difficult for you. By refinancing, you can extend the duration (or term) of the loan, which will lower your payments. If you extend the term of the loan, you will pay more in interest over time. However, it’s better to pay some interest rather than missing car payments or hurting your credit history.

Lastly, you should refinance if your credit has improved. When you initially purchased your car, perhaps your credit wasn’t the best. As time passed, you paid your loans consistently and on time. As a result, your credit has improved. If so, you should consider refinancing to a lower interest rate.

When Should I Refinance My Car Loan?

In most cases, the earlier you’re able to refinance, the better. Even a small interest rate reduction could result in significant savings over the life of the loan.

Some Reasons Why You Want To Refinance Your Car Loan

If you answer yes to…

  • Your credit score has increased since taking out your auto loan
  • You discover that you’re qualified for better financing terms
  • Your monthly car payments are higher than what you’re comfortable paying

Do not refinance if…

  • Your current loan has a prepayment penalty
  • You have no car loan
  • Your interest rate is already low

Should I Check My Credit Rating Before Applying?

Checking your credit gives you a sense of what auto loan interest rates will be. Make sure you know where your credit score stands and what factors are contributing to your score. Maybe you need to work on your credit and possibly remove a few items that can boost your score. Visit and get a free copy of your credit report every 12 months from each credit reporting company. is the official site to get your free annual credit reports. This right is guaranteed by Federal law. You can verify this is the official site by visiting the CFPB’s website.

Can I Refinance My Car Loan With Bad Credit?

It can be difficult to refinance your auto loan if you have bad credit, but it is possible. We often see people coming in where their credit is not as bad as they think it is. It does not hurt to meet with us to see how we can help your situation.

I Want To Refinance Because I Am Having Trouble Making Payments. Can I?

If you’re having trouble making payments, contact us right away. We may be able to help you based on your current situation.

What If I Want To Refinance My Car Loan To Extend My Loan Term?

Typically, when you extend the term of your loan, you will pay more in interest over the life of your loan. Extending your term could also put you at risk of becoming “upside-down” or leaving you in a negative equity situation on your loan. Essentially, this means that you will owe more than what your car is worth. If your car happens to ever become totaled or stolen, your insurance will not cover the entire amount of the loan. Also, if you have to sell your car or want to use it as a trade-in, you would still owe money on the loan. We strongly do not suggest doing this, but each person’s situation is different. Please meet with a Pearl Hawaii loan officer to talk about your situation.


Do you want to refinance? We will take care of paying off your old auto loan and help you transfer your title once you’re approved. Let’s get started…


Consumer Financial Protection Bureau (CFPB) is a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.











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We can help you buy whatever auto you’re after no matter your needs or budget with a Pearl Hawaii Vehicle Loan. Also, we have pre-approval options so you’ll be ready at the dealership with funding. Afterward, get your perfect vehicle and affordable car payments. You find the new or used auto of your choice, and we’ll provide the financing. From truckscars, and motorcycles, if you need to refinance a high interest loan, buyout your lease, or need a cash back auto loan  – we can help.

If you need to borrow money, we can help you. If you’re still not sure whether a loan is a right option for you, call us at 808.73.PHFCU (737.4328) or visit one of our locations on Oahu (Waipio, Waianae, Ewa Beach, Honolulu,  Airport,  and Pearl Harbor). Our team is ready to look at your financial situation and recommend the best option for you. You can also apply online to get started…


Building trust, nurturing dreams, inspiring hope. From home or car loans to Hawaii’s most innovative banking services, Pearl Hawaii is committed to you. Bank at any of our Oahu locations in Waipahu, Ewa Beach, Waianae, Honolulu, Pearl Harbor, or near the Airport. Additionally, you can bank using PHFCUOnline just like one of our branches. To contact us, call us at 808.737.4328, toll-free at 800.987.5583, or email us at