Refinancing your auto loan can be an excellent strategy that helps you save money. However, just because you want to refinance doesn't mean that you will qualify to do so. There are auto loan refinance requirements that must be met first.
Auto Loan Refinance Requirements You'll Need to Meet
When you refinance an auto loan, it means replacing your current loan with another with different terms. And this is usually done with a different lender. Basically, you swap lenders in order to receive terms that are more favorable for you and your current situation.
There is no minimum amount of time that must pass until you are able to refinance your car loan. However, you will still need to meet certain requirements in order to be approved.
- You Have to Be Current with Your Payments. Lenders will not refinance a loan if you are currently behind on your payments.
- You Can't Be Upside Down. The vehicle you're financing has to be worth as much as what you currently owe on the loan. Otherwise, your negative equity can prevent you from being approved.
- The Vehicle Has to Meet the New Lender's Age and Mileage Requirements. Each lender will also have their own set of rules when it comes to the age and mileage of vehicles they are willing to refinance.
- Your Loan Amount Has to Fall In the New Lender's Acceptable Limits. Meaning, the balance to be refinanced has to fall within the lender's acceptable range, which usually has a minimum and a maximum cap.
- The Type of Vehicle Can Matter. Most lenders will not refinance commercial or delivery vehicles. Vehicles with salvage or rebuilt titles are usually disqualified as well. Also, RVs and motorcycles typically do not qualify for a standard refinance.
- Your Credit Score Has to Be Good, or At Least Improved. Finally, only people with good, or at least above average, credit scores are usually able to qualify.
However, there is an exception to that last requirement.
Can You Refinance with Bad Credit?
Refinancing options are typically only available to consumers with good credit scores. However, for those who took out their loan when they had damaged credit, there are special cases that defy this requirement.
Sometimes, you can qualify for a refinance if you are far enough along in the process of improving your credit. If you had bad credit when you took out your current loan, it is possible that your credit score has improved if you have made all of your loan payments on time for an extended period.
If you have greatly improved your credit in the process of paying back your loan, it may be possible to qualify even if your credit score still isn't considered "good". This is because many lenders will look more closely at your recent payment activity.
If you have made all of the payments on your loan on time for between 18 and 36 months, you may be able to get refinanced. Lenders typically base their decision on a steady track record of about that length. You also may qualify for better terms, which will allow you to save some money.
The Bottom Line
Normally you need to have a good credit score in order to qualify for refinancing. But it's also possible if you have taken the necessary steps and time to improve your credit rating. However, not all credit-challenged borrowers will be able to refinance, as the circumstances, in most cases, have to be just right.
Auto Credit Express may not be able to help with refinancing, but we can assist people in finding financing. Our fast and free service matches consumers dealing with poor credit to local dealerships that are trained in special finance.
If you have bad credit and need an auto loan, you're in the right place. Get the process started today by filling out our simple and secure online auto loan request.