If you have bad credit, refinancing your auto loan might seem nearly impossible. The good news is that although there are no guarantees, you do have options to pursue – there are some lenders out there who may be able to help you. This article explores how to refinance a car with bad credit and provides tips on avoiding loan rejections.
Before you start looking at auto refinancing loans, go through your credit report first to see where you stand. You can request your credit report from Experian, Equifax or TransUnion. According to the Federal Trade Commission (FTC), each of these three credit reference agencies is obliged to send you a free copy of your credit report once per year, upon request.
If you notice any disputes or errors on your credit report, try to get these fixed asap. Lenders want to see that you can make your repayments on time each month, so wait as long as you can before applying for a loan if you’ve missed repayments in the past (late payments stay on your file for seven years, but will have less of an impact as time goes by).
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A lower interest rate may be the main reason you’re looking to refinance your auto loan in the first place; in turn, this could lower your monthly payments. It can be tricky to get a reasonable rate of interest if you have bad credit, but if you’ve been working hard to repair your credit score, it may be possible.
Before you do your research on lenders, document the terms of your existing loan and your vehicle details, and gather your personal financial information together, for example, your social security number, employment details, and pay stubs.
Look for lenders who specialize in auto-refinancing loans for people with bad credit (see the providers at the bottom of this article to help you get started). Compare interest rates, loan periods and use a car loan calculator to make sure you can manage the expected monthly repayments. Note charges for late payments, admin/arrangement fees or penalties for early repayment and check out other customers’ feedback on each lender to ensure they have a decent level of customer service.
It’s always a good idea to approach your existing lender first as they offered you a loan to begin with and may be willing to provide an extended auto loan with a lower interest rate. Mention that you’re shopping around to try to get better terms – this might be the nudge that your lender needs to offer you a more satisfactory deal.
If your credit score has deteriorated since you originally borrowed the funds, then your lender may refuse to refinance your loan. In which case, it’s time to look elsewhere.
- At Credit.com, you can compare auto loans according to your credit rating with their calculator.
- Bankrate also has an auto-refinance calculator on their site that could be of use if you’ve made your payments on time for the last 6-12 months and you think your credit score has improved.
- If you know you do still have a poor credit score, check out this poor credit car payment calculator over at Calculators.org.
Listed below are auto loan brokers to check out when you’re ready to refinance your vehicle:
Auto Credit Express finds auto loans for people with good, bad and no credit by matching them to a lender or dealer that is likely to accept them. They can help those with poor credit refinance their auto loans and have some helpful resources for credit repair on their website.
My Auto Loan might be worth looking at if your credit score has improved somewhat over the last 6-12 months. This company matches your requirements for auto-refinancing to various lenders and provides you with up to 4 offers in a matter of minutes.
Valley Auto Loans offers auto refinancing with a 100% application acceptance rate, according to its website’s homepage. Like the other companies mentioned above, Valley Auto Loans is a broker that matches borrowers (even those with bad credit) to lenders that can help them.
*The interest rates and auto refinancing terms for any loan offers you receive is dependent on your borrowing needs and credit history.
Refinancing your auto loan with a lower interest rate will help you save money in the long run and may mean more manageable monthly payments too. If you have bad credit, bear in mind that trying to improve your credit score first will most definitely increase your chances of being accepted for a refinance deal that works for you.
**The above information is correct at the time of publishing.