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You can refinance your auto loan for a lower interest rate or better terms even if you have bad credit. Reaching out to a business that specializes in assisting customers with bad credit can help you save money in the long run.
How Does LendingTree Get Paid?
Companies on this website pay LendingTree, and this pay may have an impact on where and how offers appear on this website (such as the order). Not all lenders, savings products, or loan options are offered by LendingTree in the market.
Note from the Editor: This article’s content is solely based on the author’s opinions and suggestions. It might not have received approval from any of our network partners through reviews, commissions, or other means.
You can refinance your auto loan for a lower interest rate or better terms even if you have bad credit. Reaching out to a business that specializes in assisting customers with bad credit can help you save money in the long run.
What you should know about refinancing a car loan with bad credit is provided below.
In this article, we’ll cover…
Best companies to refinance your car when you have bad credit
When refinancing a car loan with bad credit, it’s important to compare rates and terms from various lenders. To lower your risk profile, you might also want to think about getting a cosigner for the loan.
We compiled a list of lenders who provided subprime borrowers with an average APR below 10% during the first quarter of 2022 using application data from LendingTree partners to help you focus your search. (Subprime borrowers are categorized as having a score below 620). The majority of these lenders provide online prequalification and accept credit scores in the 500s.
Companies on this website pay LendingTree, and this pay may have an impact on where and how offers appear on this website (such as the order). Not all lenders, savings products, or loan options are offered by LendingTree in the market.
How Does LendingTree Get Paid?
Companies on this website pay LendingTree, and this pay may have an impact on where and how offers appear on this website (such as the order). Not all lenders, savings products, or loan options are offered by LendingTree in the market.
Your personal information is gathered by Auto Approve in order to determine which loans you might be eligible for, and your application is then sent to the lender of your choice. Loan terms will depend on the individual lender.
You can apply with Auto Approve and receive preapproval quotes instantly without having to pay a fee, but if your application is accepted, your lender might charge you additional fees. In addition to adding a co-borrower and various types of vehicle protection, such as roadside assistance, applicants can refinance their loans.
RefiJet processes applications and connects you with lenders, much like Auto Approve does. Although the procedure may be convenient, RefiJet charges a $395 loan processing fee, in contrast to some other refinance companies.
With RefiJet, applicants can add a co-borrower to their new loan and receive prequalification quotes from several lenders without risking their credit. No loan payments are required for the first two months, as advertised by Refijet, but borrowers should be aware that this refers to the estimated time between paying off your old loan and having a payment due on your new loan. In other words, you cannot skip any loan payments.
Caribou provides auto insurance and refinancing, but not all states allow for the availability of loans. Your state of residence can also impact your interest rate. In addition to their other charges, lenders have the option of adding a $399 processing fee.
When you apply through Caribou, your state of residence will have a significant bearing. Co-borrowers are only permitted in some states, and loans are not available in Maryland, Massachusetts, Mississippi, Nebraska, Nevada, Wisconsin, or West Virginia. You must have a minimum credit score of 740 in order to be eligible for the lowest advertised rates, and your car must have less than 85,000 miles on it.
This business can put you in touch with lenders and creditors for personal loans, auto refinancing, and even credit card offers. The process from application to funding can take as little as a few minutes, and there are no fees associated with the company’s auto refinancing service.
Gravity Lending advertises a low 3. 24% APR, but similar to Caribou, you’ll need to fulfill a number of requirements to get the lowest rates, such as having a minimum credit score of 750 and refinancing a 2018 or newer vehicle. Your new loan can have a co-borrower, and the lender says there are no payments due for up to 90 days. Refinancing is not available for cars older than 2012.
You can find refinancing options for a variety of vehicles through iLending, including cars, boats, and recreational vehicles. There is no application fee for refinancing, and this business works with vehicles with up to 200,000 miles on them.
iLending charges no application fee and joint applicants are allowed. Refinancing is available from the company for cars as old as 2011, but terms aren’t disclosed up front, and borrowers with bad credit can’t take advantage of their low starting APR.
This business collaborates with credit unions to provide auto loans and refinancing. Although there isn’t much information on Lending Arts’ website, credit unions typically provide better terms than bigger banks. There isn’t much information on their website, but it doesn’t seem like a credit check is necessary for the application.
Unlike other companies on our list, RateWorks is a direct lender. RateWorks loans are catered to borrowers with poor credit, but loans are only available in 20 states.
With RateWorks, applicants can receive quotes quickly without having their credit history affected by having a low credit score. Currently, the APR is 8 for borrowers with credit scores of 619 or lower. 09%, but RateWorks doesn’t charge any closing fees. Unfortunately, borrowers in most states can’t apply.
When to refinance your auto loan
Refinancing a loan can assist borrowers in achieving a number of objectives. Refinancing may result in a lower interest rate, saving you money on loan repayment, or it may lower your monthly payment, assisting you in maintaining financial stability.
Here are some of the scenarios where refinancing makes sense:
If your credit has improved. One of the main criteria for determining loan eligibility is credit scores. You might be able to qualify for a refinance loan with lower interest rates if your credit scores have increased since you took out your current loan, possibly as a result of your recent history of on-time car payments.
If you can’t afford your current payments. Refinancing has several ways that can reduce the cost of loan repayments. The monthly payments on a new loan with a longer repayment period will be lower. Just keep in mind that paying more interest over time may result from delaying your repayment. Alternatively, if the interest rate on your new loan is lower, it might result in a lower monthly payment.
When interest rates have dropped. Interest rates are partially determined by market forces. A refinance might be an option if market rates have decreased since you took out your current loan to get you into a better rate.
While your car’s value is high. Another element that affects auto financing is the value of your vehicle. If the car is worth more than what you owe on the loan, you may be eligible for better rates or a larger refinance loan amount.
If your dealer marked up your interest rates. Auto dealerships often mark up rates and fees for financing. If you refinance through a credit union, bank, or even an online lender after taking out your loan from a dealership, you’ll probably find a better deal.
If none of the aforementioned situations apply to you, refinancing is probably not a good idea at this time. Before attempting to refinance your auto loan, you might need to work on raising your credit score or taking care of other issues on the list.
How do I refinance a car loan with bad credit?
Before contacting potential new lenders, the process of refinancing a car loan should begin as there are several steps involved. Here is a list of the actions you can take to negotiate the best price:
Check your credit
Review your credit to see if it has improved. You should also be sure to dispute errors that hurt your scores, such as inaccurate records showing missed payments or accounts that don’t belong to you. You can pull your credit reports from all three credit bureaus for free, with no negative impact to your scores, from AnnualCreditReport.com.
Contact your current lender
Working with a lender who already has your information on file will help you to expedite the refinancing procedure. Additionally, if you already have an account with your lender, you might even be offered a better deal. Verify that your lender provides refinancing for its own loans only.
Shop for the best rate
Shop around even if your current lender has a competitive rate. See what’s offered by other auto refinancing companies in terms of rates, fees, and other loan terms that you’re looking for, like the length of repayment, to get the best deal.
Select a lender and apply
You’ll need to provide a number of documents for your application once you’ve selected the best lender for your refinance. Although every lender has different requirements, you should be ready to show your driver’s license, Social Security card, current loan documents, and your vehicle’s VIN and registration number in order to verify your income and employment information.
Refinance a car loan with bad credit: FAQ
Each lender has different requirements, but some accept scores as low as 500. You’ll most likely need better credit scores than you had when you took out your current loan in order to get the best auto loan refinance deal.
Should I refinance my car loan with bad credit?
Even with bad credit, refinancing can be an option. You might be able to lower your interest rates or monthly payments by taking out a new loan. Just make sure you are clear on your objectives and avoid applying for a loan if it won’t help you.
What happens to my credit score if I refinance?
Your credit scores may be impacted by refinancing in a few different ways. You could temporarily lose some points for each loan application. When you close an old loan account and when you take on new debt, your credit scores may also suffer. But over time, timely payments and debt repayment have a stronger, more advantageous impact that can enhance your credit health in general.
What happens if I extend the term of my car loan?
There are pros and cons to extending your loan repayment. The main advantage is that it can lower the amount of your monthly payments and help you have more money in your budget. The drawback is that because interest is charged as long as there is a balance, delaying repayment will result in higher interest costs overall.
Is there a limit to how often I can refinance my car?
No. Although there is no restriction on how many times you can refinance your auto loan, doing so frequently can have unfavorable effects. One is that taking out and repaying loans can lower your credit score. Additionally, extending your repayment period will cost you more in interest and fees, and it will increase your risk of defaulting on your auto loan.
Compare Auto Loan Offers Loan term:
Here’s how to reevaluate your payment and loan terms to help you save and pay off your car loan more quickly.
Figuring out when to refinance a car can be tricky. When refinancing a car could result in financial savings, a lower monthly payment, or both, you should do so.
FAQ
Can I refinance my car with a 500 credit score?
You can refinance a car loan with a 500 credit score if you have good credit. However, because you fall into the poor credit category with a credit score of 500, you’ll probably have to pay high interest rates.
How soon can you refinance a car loan with bad credit?
You should hold off on refinancing for at least a year if this is your first time borrowing money for a car or if you’ve previously experienced credit problems. This way, you’ll have enough time to establish a solid track record of timely payments. Some lenders won’t consider a refinancing application until you’ve made on-time payments for six to 12 months.
Can I refinance my car loan with a 580 credit score?
There’s no universal minimum credit score to determine your eligibility. Car owners with credit scores below 580, which is considered poor credit, may be eligible for a refinancing offer. This is due to the possibility that lenders’ standards for approving your new loan may vary.
What credit score is used for auto refinance?
There is no definitive answer to the question of what credit score you must in order to refinance your vehicle. If your FICO® score is 660 or higher, you’ll probably receive standard loan offers, while a score of 700 or higher will typically give you access to good loan offers.