SUMMARY
- Refinancing replaces your current auto loan with a new one, often with a lower payment.
- Credit impact: A repossession may significantly affect your credit score and may remain on your credit report for up to seven years. Refinancing works best before you’re more than a payment or two behind.
- Talk to your current lender if you’re behind in your auto loan payments, since you may have more options than you think.
If you’re struggling to keep up with your car payment, you’re not alone. Nearly 8% of total auto loan balances were at least 30 days past due as of the second quarter of this year. And with the average monthly payment for a new vehicle being $765 in the second quarter of the year, up 2.1%, it’s not surprising.*
Life throws curveballs: an unexpected bill, rising insurance rates, a job change, or a higher cost of living. Suddenly the car payment is the one you dread. That can make repossession feel inevitable, but it isn’t. Refinancing before repossession may lower your monthly payment and could help you avoid additional negative credit consequences associated with repossession.
What does car repossession cost?
Repossession costs more than losing your car. You can owe fees and a remaining balance, and your credit can take a hit that lasts for years.
- Towing and storage fees: You may still be billed for these after your car is taken.
- Deficiency balance: If the lender sells your car for less than you owe, you’re still responsible for the difference.
- Credit score damage: A repossession can drop your score by 100 points or more and can stay on your credit report for up to seven years.
That’s a lot of weight to carry out of a tough season.
How does refinancing an auto loan help you avoid repossession?
Refinancing means replacing your current loan with a new one – often with a lower interest rate, a longer repayment term, or both. This can bring your monthly payment down to something you can manage.
Here’s why that can be better than letting the car go:
1. It can lower your monthly payment.
Spreading your balance over a longer term, or securing a better rate, can give your budget more breathing room. A longer repayment term may reduce the monthly payment but may increase the total finance charges paid over the life of the loan.
2. It can help you avoid major credit damage.
Missed payments hurt, but a repossession is far worse. If you qualify for refinancing before repossession occurs, refinancing may help you avoid the additional negative credit consequences that can result from a repossession. Prior late payments may still appear on your credit report.
3. It helps you keep the vehicle you rely on.
Losing your car, truck, or motorcycle can mean losing access to work, school, and everyday essentials, especially where public transportation isn’t an option.
4. It might get you a lower interest rate.
If your credit has improved since you took out the original loan, or if rates have dropped, you may qualify for a better deal. Even a small rate drop can save you hundreds over the life of the loan.
When to refinance your car loan?
As early as you can, ideally before you’re more than a payment or two behind.
Once an account is deeply delinquent, lenders are less likely to approve a refinance. Acting early gives you more options and better terms. If you’re already behind, call your current lender, too. Some offer hardship options, like a payment deferral or modified terms, and it costs nothing to ask.
Not sure where to start? Start with the payment itself. If the monthly number is what’s keeping you up at night, we can help you look at a longer term. We’ve added 84- and 96-month options, so you can find a payment that fits your life now. Here’s what that could look like on a $50,000 loan if you are a Member:
Lower Your Monthly Payments by up to $286 per month by extending your repayment term from 60 months to 96 months.*
(Example “Direct Deposit and Auto Pay” Discount included. Without Direct Deposit and Auto Pay enrollment, rates are 1.00% APR higher and monthly payments will be greater.)
| Loan Amount | Term | APR | Estimated Monthly Payment |
| $50,000 | 60 months | 5.49% | $956 |
| $50,000 | 72 months | 5.74% | $823 |
| $50,000 | 84 months | 5.99% | $731 |
| $50,000 | 96 months | 6.49% | $670 |
Illustrative payment examples only based on a $50,000 loan at 5.49% APR** for 60 months, 5.74% APR** for 72 months, 5.99% APR** for 84 months, and 6.49% APR** at 96 months. Your actual payment depends on creditworthiness, loan amount, term, and applicable discounts. Longer terms generally result in higher total finance charges.
Final thoughts.
Letting a car go to repossession can feel like hitting reset. In reality, it can set your finances back for years. Refinancing may provide a more manageable payment and could help you avoid some of the financial consequences associated with repossession.
If you’re feeling the squeeze, talk to us today.
You don’t have to figure this out alone. As a Member-owned credit union, we’re built around your success, not shareholders. That’s why we offer flexible auto refinance options designed to keep you moving forward. Our auto refinance rate is as low as 4.99% APR** with Direct Deposit and Auto Pay (If you do not enroll, rates as low as 5.99% APR). That’s savings you can use for gas, insurance, or groceries.
Call us at 800.877.2345 or apply for an auto refinance online. Acting now could be the difference between keeping your vehicle and your peace of mind, and starting over from a tough spot.
This article is provided for educational purposes only and is not intended as financial, legal, or tax advice. FIG Credit Union does not provide legal or tax advice. Information is general in nature and may not apply to your individual circumstances. Consider consulting an appropriate financial, legal, or tax professional regarding your specific situation.
*Guinara, Maggia, “Average Car Payment and Auto Loan Statistics: 2026.” Lendingtree.com. Updated 18 September 2026. Accessed 9 October 2026.
**APR=Annual Percentage Rate. Rates shown are our Preferred rates based on creditworthiness (FICO® Score), and a 1.00% APR Auto Loan discount for Direct Deposit or full Agent Net Check going into a FIGFCU Checking account (either High Yield Checking or CashBack Checking) in the amount of $1,000.00 (one thousand dollars) or more monthly and Automatic Payment/Folio Deduction as a repayment method to qualify. Rates and terms are subject to credit approval. Other rates and terms are available. Rates and terms may change without notice prior to loan consummation. Other rates and terms are available. Rates shown are accurate as of October 22, 2026. Contact us for current rates. Financing available up to stated maximums for qualified borrowers. The Credit Union only lends up to 100% loan-to-value for clear title or private party purchases. Vehicle values are determined by the Credit Union using either vehicle cost or Kelley Blue Book/NADA, whichever is lower. Membership eligibility required. Farmers Insurance Federal Credit Union is federally insured by the National Credit Union Administration. We are an Equal Credit Opportunity Lender.
