If you’re considering refinancing a car loan, you may be wondering if you should use a different lender, or stick with your current one. You can use the same lender to refinance your auto loan, but you might be missing out on a better deal another lender can offer.
Refinancing a Car Loan with the Right Lender
You aren’t going to know if you’re getting the best available deal if you stick with your current lender. Even if you have a great relationship with them, and they have a great refinancing offer, you should see what other lenders can do, as well.
When you rate shop for a refinancing deal, you apply with multiple different lenders. This gives you options to choose from that you can compare side by side. At the very least, you should get three different refinancing quotes. Make sure you rate shop within 14 days to avoid multiple hard inquiries affecting your credit score.
Timing Is Key with Auto Refinancing
In order to successfully refinance a bad credit car loan, you typically need to wait at least one and two years before applying. Lenders aren’t going to consider you if you haven’t had the loan for very long, because they need to see that you’ve stayed current with your monthly payments.
In addition, your credit score should have improved by this time, which helps you qualify for a better interest rate when you refinance. If you don’t meet these two requirements, you’re going to find it tough to get approved.
You also need to consider why you want to refinance your auto loan right now. If you like the vehicle you have and you want a lower monthly payment, refinancing can be great. There are two ways you can do this:
- Get a better interest rate – The best option of the two, you can lower your monthly payment and save money on interest charges when you refinance with a better interest rate.
- Extend the loan term – If you don’t qualify for a better interest rate, but you need to make your monthly payment more affordable, you could refinance with the same interest rate and extend the loan term. Keep in mind that this increases your total cost because it results in you paying more in interest charges in the long run.
Another thing to consider is whether or not the prime interest rate has dropped. Interest rates are set by the Federal Reserve, and can fluctuate quarterly. It isn’t easy to pinpoint exactly when the rate rises or falls, but it doesn’t hurt to do some research on current car loan interest rates and their trends.
Make sure you also know the average interest rates other people in your credit score range are receiving, so you can determine whether or not you’re getting a fair deal.
Need Help Finding a Dealership?
Sometimes, when you're dealing with bad credit, you're left with no choice but a bad credit auto loan with a high interest rate. Luckily, you don’t have to stick with one forever. As long as your credit score improves and you have a good history of on-time payments with the loan to show, there’s a good chance you could qualify to refinance with a better interest rate.
You can view and compare refinancing rates through our trusted partner if you fill out the secure refinance request form on our website.
If you’re not looking to refinance right now but you need help getting started on the bad credit car buying journey, we’re here to help. At Auto Credit Express, we work with a coast-to-coast network of special finance dealerships that have the lending resources to help people get approved for bad credit auto loans.
Just fill out our fast, free, and easy car loan request form today, and we’ll get started finding you a local dealer!