For consumers with problem credit refinancing can often lower their monthly payments but qualifying for a car loan of this type can often be difficult
Understanding credit repair
Car buyers with problem credit that are currently financing a vehicle with a high risk car loan sometimes discover that by refinancing through another lender they can lower their loan payments and free up additional cash.
At Auto Credit Express we know this can happen because we’ve spent the last two decades helping poor credit buyers find those dealers that can give them their best opportunities for car loan approvals.
But we also want applicants to know that if they’re considering this option they need to know that the circumstances usually have to be just right. In other words, just because they want to refinance their loan doesn’t necessarily mean they’ll qualify for this type of loan modification option.
Auto loan refinancing
Refinancing a car loan can result in a number of advantages to borrowers including reduced interest expenses with a lower interest rate and/or a decreased monthly payment. The option of refinancing, however, is typically only available if a borrower’s FICO scores are good, although it can sometimes be done if the borrower is far enough along in the process of reestablishing their auto credit.
Lower monthly payments are typically the result of a better interest rate – something that can also reduce overall interest costs. Consumers with previous problem credit typically might qualify (this doesn’t always happen) for a lower interest rate if they’ve made timely payments on their current loan for anywhere from 18 to 36 months. The timing for this also depends on the term of their current loan and their original credit situation.
Lower monthly payments can also be structured by just extending the existing loan term. For example, if the current loan term has 24 to 36 months remaining on it, car loan refinance can add an additional 12 months (possibly more) to the loan term. Although this extends the payoff date (and typically increases the overall interest costs), a lower payment can free up money in borrower’s budgets for utility bills and other essentials. It also can reduce the possibility of late or even missed auto loan payments.
Credit score improvements
Refinancing a subprime car loan can also help raise a borrower’s FICO scores. Think about it: If a high payment in the past has caused any problems, a lower payment can help boost credit scores by making it easier to pay those monthly payments in a timely fashion. Since the lenders that offer these refinancing options also report these loans and loan payments to the credit bureaus, the borrower’s credit scores should also improve.
As we see it
If your current monthly car payment is too high, one option that may be available to reduce that monthly payment (and possibly even the interest rate) is car loan refinancing.
One other tip: if you’ve been turned down for a conventional car loan or if you know your credit is poor and you’re worried about qualifying for a car loan, instead of visiting a BHPH dealer, we want you to know that at Auto Credit Express we match applicants with dealers that can offer them their best chances for approved car loans.
So if you’re ready to establish your auto credit, you can begin now by filling out our online car loans application.
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