PenFed Credit Union provides its more than 2.9 members with various financial products and services, including banking, credit cards, mortgages and personal loans. The credit union also offers auto refinance loans for people looking to lower their monthly car payments or reduce the interest they pay to finance their vehicle.

This in-depth review evaluates the pros and cons of PenFed Credit Union’s auto refinance program, including its annual percentage rates, fees, borrower eligibility requirements and vehicle and mileage restrictions. Read on to find out if you should consider PenFed for your auto refinance loan needs.

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Best direct lender

While many auto refinance companies act as a go-between linking borrowers and financial institutions, PenFed Credit Union is a direct lender. This means PenFed both funds and services your auto refinance loan. Additionally, PenFed doesn’t charge its borrowers any documentation or origination fees. (Some companies charge up to $499.)

PenFed offers auto loan refinance prequalification — through which you can see potential loan offers — with only a soft credit pull, which won’t affect your credit score. Should you decide to apply, you’ll have to authorize a hard credit check to receive an official loan offer.

All borrowers who receive loans through PenFed must be members of the credit union. During the loan closing process, the credit union establishes your membership by opening a savings account in your name and depositing $5 (at no extra charge).

PenFed Credit Union auto refinance pros and cons
No document fee or origination fee Prequalify with a soft credit pull Finance up to 125% of your current loan balance (up to $150,000)Members get discounts on add-ons, such as Guaranteed Asset Protection (GAP)The borrower is responsible for paying off the original loanNot ideal for poor credit borrowersMileage and model year restrictions may affect the rate or eligibility
Pros explained
No document fee or origination fee

PenFed Credit Union does not charge any document or origination fees on auto refinance loans. Many other auto refinance companies charge up to $499 in fees, which significantly increases the total loan amount owed.

Prequalify with a soft credit pull

You can prequalify for a PenFed auto refinance loan with only a soft credit inquiry, which doesn’t negatively impact your credit score. If you meet the eligibility requirements, you’ll be provided with a potential loan offer.

A prequalification is not a guaranteed rate, but it does give you an idea of the loan terms you’re eligible for. You can then decide whether or not to formally apply, which does require a hard credit check that can negatively affect your credit score by as much as 10 points.

Finance up to 125% of your current loan balance (up to $150,000)

PenFed allows borrowers to refinance 125% of their current loan balance. However, the credit union does set a limit of $150,000 total. The average new car costs $49,500, so PenFed’s maximum refinance amount should be ideal for many car owners.

Members get discounts on add-ons, such as Guaranteed Asset Protection (GAP)

PenFed members get access to discounts on a variety of vehicle-related services, like car insurance, Guaranteed Asset Protection (GAP) insurance and car rentals. There’s also discounts for members who buy a vehicle through the TrueCar car buying service. Additional discounts in other industries include supplemental insurance (e.g. dental, hospital), home security systems and personal finance services.

Cons explained
The borrower is responsible for paying off the original loan

Some auto refinance companies handle paying off your previous loan, but PenFed does not. Once you’ve closed on your auto refinance loan, PenFed will send you a check by mail, and you’re responsible for paying the original loan in full with those funds. You’ll also need to collect a Demand for Certificate of Title from the previous lienholder so you can transfer the title to PenFed. Note that these steps are usually included in a document fee charged by financial institutions, and PenFed doesn’t charge this fee.

Not ideal for poor credit borrowers

To be eligible for an auto refinance through PenFed Credit Union, you must have a minimum credit score of 640. That’s considered a fair credit score by FICO standards. Note that, like with all auto refinance companies, the lowest available annual percentage rates are offered only to borrowers with excellent credit.

Mileage and model year restrictions may affect the rate or eligibility

Several mileage restrictions could affect your eligibility for an auto refinance loan with PenFed. The maximum mileage a vehicle can have is 125,000, which is a slightly lower cap than some other auto refinance companies.

Secondly, only borrowers with new autos — model year 2022 and newer with less than 7,501 — are eligible for the lowest rates. Vehicle models 2021 and earlier that have more than 7,501 miles are considered used by PenFed, and the starting annual percentage rates are higher. Additionally, you can only qualify for the longest auto refinance loan term (84 months) if your vehicle is less than five years old and has fewer than 60,000 miles.

PenFed Credit Union auto refinance offerings

You can get two types of auto refinance loans from PenFed Credit Union. To qualify for either, you must have a credit score of at least 640. PenFed also considers your debt-to-income (DTI) ratio and the vehicle’s loan-to-value (LTV) ratio.

New auto refinance

A new auto refinance means your vehicle’s model year is 2022 or later, and has less than 6,401 miles. The company reserves its best interest rates for these vehicles. Possible loan terms are 36, 48, 60, 72 or 84 months.

Used auto refinance

PenFed charges higher interest rates for used cars — any pre-owned vehicles from 2021 or earlier with 7,501 or more miles. (The maximum mileage limit is 125,000.) Loan terms for a used car auto refinance could be 36, 48, 60, 72 or 84 months. However, if your car is more than five years old with more than 60,000 miles, your loan term cannot be longer than 72 months.

PenFed Credit Union auto refinance pricing

PenFed’s interest rates for auto refinance loans vary according to market conditions, but generally, the credit union’s starting annual percentage rates are competitive compared to other auto refinance companies. Note that only borrowers with excellent credit, a low debt-to-income ratio and a low loan-to-value ratio will be offered the best interest rates available.

However, all vehicle owners who refinance an auto loan with PenFed can benefit from the credit union’s lack of a document or origination fee. Some auto refinance companies add this fee, which can be up to $499, to the total cost of the loan, often citing admin services like paying off the previous lienholder and helping with the vehicle title change as justification. However, with PenFed, borrowers are individually responsible for these necessary steps. As a result, there’s no document fee.

Additionally, while some auto refinance companies charge a prepayment penalty fee if you pay your loan off before the agreed-upon term, PenFed does not.

PenFed Credit Union auto refinance financial stability

PenFed Credit Union is owned by its members, rather than external shareholders. This means it doesn’t receive the same financial stability ratings that many other lenders receive from third-party organizations like Fitch and Standard & Poor’s.

However, the company publishes annual reports that provide some insight into its operations. The latest report says PenFed has over 2.9 million members with over $35.3 billion in assets. The report also notes that the institution has $910 million in excess capital beyond its regulator-required net worth.

PenFed Credit Union auto refinance accessibility
Availability

Anyone in the U.S. with a credit score of at least 640 may be eligible for an auto refinance loan through PenFed Credit Union. Membership is not required to apply, but you must become a member if you accept a loan. This is handled seamlessly by PenFed: During the loan closing process, the credit union establishes your membership by opening a savings account in your name and depositing $5 (at no extra charge to you).

PenFed offers all of its services, including auto refinance, online and by phone. It also has brick-and-mortar branches in several U.S. states and territories, including California, Georgia, Maryland, Nebraska, North Carolina, Ohio, Oregon, Pennsylvania, Puerto Rico, Texas and Virginia.

Contact information

You can schedule a phone call with a PenFed representative using an online form on the PenFed website. You can also call PenFed directly:

If you’re calling from outside the U.S., you can use these phone numbers:

User experience

PenFed’s online user experience for applying for an auto refinance loan is entirely virtual, unless you prefer to speak to a representative by phone or want to apply in-person at one of the credit union’s branches.

Note that its mobile experience is better for Apple users than Android users, at least according to customer reviews. The PenFed mobile app has a 4.2 rating on the Apple App Store but only a 3.8 rating on the Google Play Store.

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PenFed Credit Union auto refinance customer satisfaction

PenFed Credit Union ranks sixth in J.D. Power’s 2022 U.S. Consumer Lending Satisfaction Study, scoring 743 out of 1,000.

Third-party reviews show conflicting opinions. On the one hand, 1,438 reviews have led to a 4.4 out of 5-star rating. Meanwhile, on its Better Business Bureau (BBB) page, the credit union has a rating of 1.18 out of 5 stars and more than 575 complaints, only 161 of which have been closed.

PenFed Credit Union auto refinance FAQs

What is PenFed Credit Union?

Pentagon Federal Credit Union (PenFed) is a federally insured financial institution (member FDIC) founded in 1935 as a military credit union. However, it’s now available to the general public based in the U.S. and its territories and has become the country’s second-largest credit union, serving nearly 3 million customers.

Is PenFed a good credit union for auto refinancing?

PenFed is a good credit union for auto refinancing if you have a credit score of at least 640 and want competitive interest rates from a direct lender. Additionally, PenFed doesn’t charge the often pricey document fee that other auto refinance companies charge.

What credit bureau does PenFed use?

PenFed may check your credit score based on the FICO score, which sources data from the three main credit bureaus: TransUnion, Experian and Equifax. Alternatively, PenFed may use your VantageScore, which also combines data from all three bureaus.

How long does it take PenFed to approve a loan?

You can prequalify for an auto refinance loan from PenFed online in minutes, then decide whether or not to formally apply. PenFed doesn’t make any claims about the speed of its approval process, but some third-party reviews mention being approved for a loan within two or three days of applying.

Does PenFed charge for refinancing an auto loan?

PenFed doesn’t charge any auto loan refinancing fees — no document fee, no origination and no prepayment penalty if you pay off your loan before the agreed-upon loan term. However, like with any loan, you will be charged interest on your loan. Your exact rate will depend on your creditworthiness and the specifics of your vehicle.

How we evaluated PenFed Credit Union auto refinance

Our PenFed Credit Union auto refinance review is based on each of the following factors:

Loan specifics: We compared PenFed auto refinance loans to offerings from competitors to assess the credit union’s pros and cons. Availability: We evaluated how widely available auto refinances from PenFed are to different types of consumers. Customer reviews: We examined PenFed refinance reviews and analyzed polling data from J.D. Power to assess average consumer satisfaction levels. Financial stability: We considered the company’s recent financial performance and growth to project its stability moving forward

There may be other factors that matter in your decision-making process. If so, you may need to conduct further research before choosing whether to pursue a PenFed auto refinance loan.

Summary of Money’s PenFed Credit Union auto refinance review

PenFed Credit Union offers auto refinance loans at competitive annual percentage rates to borrowers with credit scores of 640 or higher. You can prequalify online with only a soft credit pull to get an idea of your potential loan terms. The formal application, which requires a hard credit check, is easy to complete online.

In terms of customer service, the company is the sixth-highest-ranking lender in the J.D. Power 2022 Consumer Lending Satisfaction Study. Third-party review sites reveal some negative experiences, but overall, PenFed has received more positive feedback than negative.

Consider these factors while deciding whether the credit union is a good fit for your auto refinance loan needs. You can also review our guide on how to refinance a car to learn more about the process.

Original: Money.com: PenFed Credit Union Auto Refinance Review