Auto refinancing is when you take out a new car loan to replace an old one. If someone is stuck in a high interest car loan, he might want to refinance in order to get a lower rate. Or if someone wants to lower his monthly payments, he might refinance for a longer time period. The new loan is used to pay off the original loan, and then the borrower proceeds to pay off the new loan in monthly installments. You get charged a small fee by the lender, and there isn’t much paperwork.