Refinancing a car with bad credit isn't impossible, but it may pose a challenge for borrowers with lower credit scores. If you took out a subprime auto loan, chances are your interest rate may be on the high side. Refinancing can lower your interest rate and save you money. Here's how.
Check refinancing requirements. To keep the car you love and get a new auto loan with new terms, you need to meet the qualifications of the lender. This can be your existing lender or a new one.
All lender requirements vary, but in general, your credit must be either good (a score around 670 or higher) or better than when you took out your loan. Most refinancing is reserved for borrowers with good credit. However, if you originally took out a subprime auto loan with bad credit, your credit has improved, and you've kept your loan current for at least one year, you may be in the running to save money by refinancing.
Does your car qualify for refinancing? Your vehicle also needs to meet certain specifications. Typically, a car should be in decent condition, not be too old, and have less than 100,000 miles on it. Most lenders also prefer to refinance auto loans that aren't too new or too close to being paid off. Many require you to be current on your loan and not in a negative equity situation.
Refinancing pros & cons. Refinancing replaces your current auto loan with a new one. It has its advantages such as keeping your car and saving money on your payments each month. You could even raise your credit score if you're responsible with your loan.
To save money on your monthly car loan, your can lower your interest rate, stretch your loan term, or both. To save overall, be sure you're getting the lowest interest rate possible. If you only stretch your loan term without first lowering your interest rate, it can cost you more overall.
When you need to refinance your car loan with bad credit but don't know where to turn, we want to help. Auto Credit Express works with a large network of providers ready to help with your refinancing needs. Our auto loan refinance request form can connect you to a refi lender near you.