Refinancing a car loan can offer real benefits—like lowering your interest rate, reducing your monthly repayment, or giving you more flexible loan terms. But while it might sound like an easy win, refinancing isn’t always the smartest financial decision.

Here’s what you need to know before you make the switch, and how a finance broker can guide you through the process.

Step 1: Understanding Your Current Loan

A finance broker will start by reviewing your existing loan: the balance remaining, interest rate, repayment history, remaining term, and any exit fees. They’ll also take the time to understand your goals. Are you trying to lower repayments, clear the loan faster, or just take advantage of what looks like a better deal?

This is the critical first step to determining whether refinancing will actually improve your financial position—or potentially put you in a worse one.

Step 2: Checking Eligibility

Refinancing is essentially applying for a brand-new loan. That means a new lender will assess your credit history, employment, and the current value of your car just like they would for any fresh application. Your broker will help you determine if you qualify, and what products are available to you.

They’ll also work out whether the long-term savings outweigh the costs of switching.

Step 3: Gathering Documents

To explore your options, you’ll need to supply:

  • A copy of your current loan statement

  • A current payout letter

  • Proof of income (like payslips or bank statements)

  • Your driver’s licence or ID

  • Registration and possibly insurance details for your vehicle

These documents help lenders and brokers match you with suitable refinancing products and ensure your new loan is manageable and responsible.

Step 4: Comparing Lenders

Your broker will compare options from a panel of lenders—looking beyond just the interest rate. They’ll factor in:

  • Any establishment or exit fees

  • Ongoing account charges

  • Differences in loan structure

  • Early payout flexibility

  • Total cost of credit over time

They’ll present your options clearly so you can see if refinancing delivers a true financial benefit.

Step 5: Application and Approval

If the numbers stack up and you’re comfortable proceeding, your broker will submit the refinance application. The new lender will assess and, if approved, provide formal documents for signing.

Once everything is finalised, the new lender pays out your existing loan directly, and your new repayments will begin on the agreed date.

Step 6: Timing and Settlement

Most refinance applications settle within 3 business days, but can often occur much quicker, and depending on how quickly documentation is provided and how efficient your current lender is at providing a current payout letter.

Your broker coordinates this process to keep it as seamless as possible.

Before You Refinance: A Reality Check

It’s easy to assume that a lower interest rate means you’re getting a better deal—but that’s not always the case.

Sometimes, refinancing to a lower rate results in a longer loan term or additional fees, which means you could end up paying more over the life of the loan. This is especially important to consider if your goal is to reduce monthly repayments. In some cases, even if you pay more over the term, the change can still be classed as a genuine financial benefit if it supports your cash flow or reduces financial stress.

However, ASIC guidelines require that refinancing must place the borrower in a better financial position overall. If refinancing only serves to lower your rate but ultimately increases your total repayments or puts you under more financial strain, it may not be in your best interest—and it may not be allowed.

A Finance Broker’s Role

An experienced broker will help you understand:

  • Whether your refinance goal meets responsible lending standards

  • The true cost of the new loan, including all fees and charges

  • Whether refinancing genuinely improves your financial position

They can also suggest alternatives if refinancing isn’t the best move right now.

Bottom line? Refinancing can be a great tool when used wisely—but don’t get caught out by focusing only on rate. Look at the big picture, and always make sure the numbers work in your favour.