Can I refinance my car loan when I have bad credit? Part Of Refinancing a Car Loan In this series Refinancing a Car Loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive tools and financial calculators as well as publishing original and impartial content. This allows users to conduct research and analyze information for free to help you make sound financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site come from companies who pay us. This compensation may impact how and where products appear on this site, including for instance, the sequence in which they appear in the listing categories and other categories, unless prohibited by law. This applies to our mortgage or home equity products, as well as other products for home loans. However, this compensation will affect the content we publish or the reviews appear on this website. We do not contain the entire universe of businesses or financial offers that may be available to you. PeopleImages/Getty Images
4 min read Published January 13, 2023
Written by Allison Martin Allison Martin Written by Allison Martin’s work started over 10 years prior to that as a digital content strategist, and she’s since been featured in numerous leading financial media outlets, such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Edited by Rhys Subitch The editor is Auto loans Editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to manage their finances through providing precise, well-researched, and well-researched data that breaks down otherwise complex topics into manageable bites. The Bankrate promise
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If you have questions about money. Bankrate has the answers. Our experts have helped you understand your money for over four decades. We continually strive to provide our readers with the professional guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards , so you can trust that our content is honest and reliable. Our award-winning editors and journalists provide honest and trustworthy content to help you make the best financial decisions. The content created by our editorial team is factual, objective, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates and useful tools to you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and services or through you clicking specific links that are posted on our website. Therefore, this compensation may impact how, where and in what order products appear in listing categories in the event that they are not permitted by law. We also offer mortgage, home equity and other products for home loans. Other factors, such as our own proprietary website rules and whether a product is available within your region or within your personal credit score may also influence the manner in which products are featured on this site. While we strive to provide the most diverse selection of products, Bankrate does not include details about every credit or financial product or service. Do your vehicle loan payments stretching your budget thin? You may have considered refinancing to lower your payment or possibly get a better interest rate. But if your credit score is low this might not be feasible or even save you money. Instead, consider alternatives first. Can I refinance my car loan with bad credit?
While yes, you can refinance a car loan with bad credit it can put you in a precarious financial situation, so it’s best to consider other options first, such as asking for loan modification or trade in your vehicle.
The reason you shouldn’t refinance a car loan using bad credit Lenders start a new loan period when you . In practice, you could get a more affordable monthly installment. However, there’s a caveat: Unless you have improved your credit rating since taking out the original loan but you’re not likely to be able to get a better rate of interest. Even worse, you could be paying more over the course of the loan because the lender has more time to take interest from you. If you’re looking to reduce your monthly payment, this can work. Otherwise, stretching out your loan time frame without securing a lower interest rate may cost you more than your car is worth. It’s equally important to determine if your current lender charges prepayment penalties. If it does, the disadvantages of refinancing your auto loan might outweigh the benefits of a reduced monthly payment. How do you refinance the car loan with bad credit If you already have a loan and it has declined since you purchased your vehicle or you are in need of to lower your monthly payments it could be worth refinancing. Similar to shopping for new or used cars the process of refinancing involves a lot of study. Check your credit Review your credit score and report to stay clear of any unpleasant surprises before shopping for the next loan. If you notice any inaccurate or out-of-date information, file disputes promptly with the credit bureaus — Experian, TransUnion or Equifax — reporting the incorrect data. You can request a copy of your credit report for free using . Explore your options consult with your current lender on refinancing options that may be open to you. Think about credit unions or banks you currently do business with. Also, like Caribou, RefiJet and Ally that are geared towards customers with less than perfect credit may be a viable alternative. Based on the lender, you may be able check the rate of your loan without impacting your credit score. Bankrate Tip
When you shop, pay at the your options for repayment and the requirements for approval — especially in relation to your car’s age and mileage.
Apply for a new loan Before you submit a loan application, gather any documents that the lender requires to expedite the review process. They will typically require evidence of your income, residency , and other information regarding the current loan. Additionally, you will need to supply the amount of miles as well as the make, model, and the vehicle identification number for your car. When you apply, accurately complete the forms to avoid discrepancies that can cause a rejection of your application. The lender will verify the information you have provided. Complete the loan Review the loan documents to make sure the terms and conditions work for you. If yes, you must sign the dotted line to finalize the loan. The funds will either be transferred straight to the current lender or to you to allow you to pay off the original loan off. Bankrate Tip
Contact your lender to see the date you will begin making payments. From here, you will follow the new monthly payment schedule until the time you are able to pay off the refinance loan.
How to boost your credit prior to refinancing the best interests of you to boost your credit score prior refinancing your vehicle loan. The best interest rates are usually offered to borrowers with excellent or excellent credit, and having a better credit score could mean the difference between getting an . Here are some tips to make sure you pay your bills on time. Get current on any past-due debts. Reduce the amounts on your credit cards at 30 percent, or less than your credit limit. Do not close credit accounts that you have closed. Only apply for new credit when you need to. You should also keep track of your credit score to keep track of your growth. Certain credit cards or lenders offer free credit checks on your monthly statements. In other cases, you might have to check them infrequently or paying to see your score. Alternatives to the car loan refinancing There’s a variety of options available when you look at the numbers and determine that refinancing your vehicle loan isn’t the best decision for your financial situation. Sell it. Based on the value of your vehicle is worth and the amount that is due to the loan it is possible to trade it in for a more affordable option , and even transfer the balance to an entirely new loan. Request modification. Since the majority of lenders don’t modify their loans so you can request this in the form of . This lets you adjust payment terms — and, sometimes, interest rateswithout going through a new application process. Defer payments. This option is only available if you’re in a financial crisis that is short-term however, it’s an alternative. You can cut off up to 3 months of installments. However, they’ll be tacked onto the final month of your loan and you will still being charged interest. Change your budget. If you’re struggling , consider adjusting your budget to make the payments easier to afford until you qualify to refinance. It is also advisable to increase your credit score in the meantime to get an interest rate that is better when you apply for an additional loan. The bottom line Unless you’re facing financial difficulties and are at risk of having to pay a penalty problems if you don’t reduce the payments, refinancing with bad credit may not be a healthy financial decision. Instead, explore alternatives, such as adjusting your spending plan to temporarily get your finances and credit back on track. Or you may be able to exchange your vehicle for a more affordable ride, depending on how much it’s worth.
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Allison Martin’s work began more than 10 years ago when she was an expert in digital content, and since then she’s been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain confidence to control their finances with precise, well-researched and well-researched facts that break down complex topics into manageable bites.
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