There are a few situations where it makes sense to consider refinancing your auto loan. But this can be tough to do if you have bad credit. If you’re faced with the possibility of not being able to make your payments, refinancing might be right for you. This is just one situation, and it’s always a good idea to weigh your options.
Qualifying to Refinance Your Car Loan
Refinancing is when you replace your current loan with a new loan that might have a different interest rate, a different term, or both. This option is usually only available to people with good credit. However, if you’re in the process of rebuilding your bad credit with an auto loan, your credit scores may have improved enough for you to qualify. Typically, lenders will want to see around 12 to 36 months of on-time payments, but this will vary depending on the lender.
When to Look into Refinancing
Refinancing can make it possible for you to get better rates and terms. You may want to refinance your subprime vehicle loan if you find yourself in one of these situations:
- Your monthly payment is too high – One of the most common reasons people refinance is to get a more affordable monthly payment. However, this may not be wise when you look at the big picture. A lower monthly payment is usually obtained by extending the term of the loan, which will leave you paying more in interest charges over time.
- Your credit has improved – Making auto loan payments in full and on time is a great way to improve your credit. If you’ve been doing this for at least 12 months, your credit scores may have increased enough for you to qualify for a better interest rate. Depending on your situation, refinancing could save you a lot of money in interest charges in this case.
- Interest rates have decreased – Lenders commonly offer loans based on the US prime interest rate. The prime rate can fluctuate because it’s based on the federal funds rate (the rate commercial banks charge one another). The prime rate is also the interest rate banks charge their best customers. If the prime rate has come down since you financed your car, it may be time to refinance to a lower APR.
The Bottom Line
Refinancing an auto loan can be helpful in many situations. Make sure you know if it’s the right choice for you and research your options carefully before making a decision. But before you can refinance, you need an auto loan. If you have bad credit and are worried about whether or not you can qualify for financing, Auto Credit Express wants to help.
We work with a nationwide network of special finance car dealers who have the lending resources available to help people dealing with credit issues. Our service is free and there is no obligation. It’s simple to get started, just fill out our online auto loan request form now!