At a basic level, refinancing is the process of replacing your current car loan with a new one. While people refinance their cars for many reasons, you ideally want to reduce both your monthly payments and the cumulative interest charge you pay over the course of your loan.

Most people refinance a car loan to 1) lower their monthly payments, 2) decrease their interest rates, or 3) remove (or add) someone on their loans. Let’s look at each reason for refinancing.