Refinance Car Loan with Bad Credit

What is Car Loan Refinance?

Car loan refinancing is like giving your auto loan a makeover. It's a way to replace your current car loan with a new one. Why would you want to do this? Well, there are a few good reasons. First, it can help you get a lower interest rate, which means you pay less money in the long run.

Second, it can reduce your monthly payments, giving your budget some breathing room. And third, it might help you pay off your loan faster. Essentially, car loan refinancing is a financial makeover for your car loan, potentially making it more affordable and manageable.

Refinance Car Loan with Bad Credit

Yes, it's possible to refinance an auto loan even if your credit is less than perfect. Nevertheless, your choices for loan providers may be somewhat limited. Certain lenders may be hesitant to assist borrowers with suboptimal credit scores, and securing favorable interest rates for auto loan refinancing might prove challenging.

Refinancing your car loan can be a smart move, especially if you're stuck with a high-interest rate. Even if you have bad credit, there are options available to get a better deal.

Your credit score plays a big role in the interest rate you get. People with bad credit often end up paying much higher interest rates compared to those with good credit. Data from Experian show that borrowers with bad credit pay an average interest rate between 18.55% and 21.32% on used car loans. That’s around three times the average interest rate of 6.79% for borrowers with excellent credit.

But by refinancing, you have a chance to lower your rates and reduce your monthly payments. Refinancing your auto loan with bad credit may be difficult, but it can offer a chance to lower your rates and monthly payments on your current vehicle loan in the right circumstances.

There are many companies out there that are willing to work with you to get a refinance car loan with bad credit. Plus, there are steps you can take to improve your credit score over time, which will help you qualify for even better rates.

Best Refinance Car Loan

If you're looking to refinance your car loan, especially with bad credit, we've got some options for you. Refinancing means getting a new loan to replace your existing one, often with a better interest rate. Here are some top recommendations:

Auto Credit Express

This lending network has been a favorite for borrowers with bad credit for years. They work with over 1,200 lenders across the country, and these lenders have flexible credit requirements. What's great is that you aren't limited to choosing a lender in your home region. The large network means you have multiple lenders competing for your business, which often results in more forgiving approval standards and competitive loan terms.

You can complete their application in about three minutes, and shortly after, you'll receive a status update and potentially multiple loan offers to choose from. It's a quick and painless process, and they help more than 13,000 people secure financing each month.

To qualify for refinancing through Auto Credit Express, you generally need to owe less on your car than its current Kelley Blue Book value, be current on your loan payments, meet the car's age and mileage requirements set by each lender, have an outstanding auto loan amount within the new lender's acceptable limits, and have a better credit score than when you received the initial loan. Most lenders also require at least $1,500 in verifiable monthly income to consider your application.

PenFed Credit Union

Credit unions like PenFed often offer lower interest rates and fees compared to traditional banks. They claim their average customer saves $191 per month when refinancing. While this is typically for people who've improved their credit since they first took out the loan, PenFed is still a solid choice for a good deal on a refinance.

They provide valuable tools on their website, including a prequalification form and a loan calculator. Plus, they offer informative guides on their additional offerings, such as GAP protection and extended warranty coverage.

RefiJet

This company acts as a direct lender and works with all credit histories, including subprime borrowers. They claim their customers who choose to lower their monthly payment save an average of $150 a month. Individual savings can vary. You can also use RefiJet to cash out equity in your car, and they offer a perk where customers get to skip their first two payments after refinancing, which can help relieve some immediate financial stress.

myAutoloan.com

This is another lending network that partners with many lenders specializing in bad credit loans. With a single application, you can receive up to four loan offers within minutes, and there's no obligation to accept any of them. After filling out a free and secure two-minute prequalifying form, the network quickly matches your request to its many partner lenders.

If you receive multiple loan offers, you have the opportunity to compare terms and conditions to find the offer that suits you best. Once you choose a loan offer, myAutoloan.com will redirect you to the lender's website to complete the remaining loan paperwork. From there, you'll start making monthly payments to the new lender.

LendingTree

LendingTree is a network that can help you match with a direct auto lender in minutes. You can easily view and compare rates and terms to choose the best loan offer for your situation. Filling out their prequalifying form to see the types of loans you may be offered is obligation-free and doesn't affect your credit score. They're highly rated by users, and their website provides a hassle-free experience with a variety of options.

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Should You Refinance a Car With Bad Credit?

Refinancing might not be the best option if you've already paid off most of your existing loan, if your vehicle is old and has high mileage, or if you owe more on your loan than your car is worth. Refinancing a car loan with bad credit can be a smart move if certain conditions apply. Here's when you should consider refinancing your car loan:

• Improved Credit Score: If your credit score has improved since you initially financed your vehicle, you may qualify for better terms and a lower interest rate through refinancing.
• High Interest Rate: If your current interest rate is higher than the average rates available today, refinancing can help you secure a more favorable rate, reducing your monthly payments and overall costs.
• Dissatisfaction with Current Lender: If you're unhappy with your current lender for any reason, refinancing gives you the opportunity to switch to a lender that better suits your needs.
• Lower Monthly Payment: Refinancing can be beneficial if you want to lower your monthly car payment. This can be achieved by reducing your APR (Annual Percentage Rate) or extending your loan term.
• Cash-Out Refinancing: If you need to borrow additional money using your car's equity, cash-out refinancing allows you to do so while refinancing your existing loan.
• Loan Balance: Generally, refinancing makes sense if you owe $7,500 or more on your current auto loan.

What to Do If You Can’t Refinance a Car Loan?

When you can't qualify to refinance a car loan, especially if you have bad credit, here are some alternative options to consider,

Co-signer: You can ask a friend or family member with good credit to co-sign for the refinance loan. Their good credit can help you qualify for better terms. However, make sure the lender allows co-signers.

Trade for a More Affordable Car: If your current car loan is causing financial strain, you might consider trading in your current vehicle for a more affordable one. This can involve taking out a new loan with a lower balance, making it easier to manage.

Lender Assistance Programs: Reach out to your current lender and inquire about any assistance programs they offer. Some lenders provide options to help you without the need for refinancing, especially if you're facing difficulty making payments.

Improve Your Credit: If refinancing isn't an immediate option, continue making on-time payments on your current loan for six to 12 months. This can have a positive impact on your credit, potentially making you eligible for better loan terms in the future.

How Soon Can You Refinance a Car Loan With Bad Credit?

You can refinance your car loan as soon as the deal for your current loan closes, provided your lender doesn't have any specific waiting period restrictions. However, many financial experts recommend waiting for about six months before refinancing. Waiting can often lead to better loan terms, and it gives you time to work on improving your credit score and overall financial situation.

How to Refinance a Car Loan with Bad Credit?

Refinancing your auto loan with bad credit is quite similar to doing it with a good credit score, but it might involve a bit more effort due to limited lender options and higher rates. Here's how to go about it:

Check Your Credit Score

Start by checking your credit score to confirm your current standing. It's essential to know where you stand before proceeding. You can access a free credit report annually from one of the major credit bureaus (Equifax, TransUnion, or Experian), or some financial institutions offer free credit score updates to their customers. For a more detailed credit history, you can subscribe to a credit reporting service.

Find a Refinance Lender for Bad Credit

Once you understand your credit situation, look for lenders willing to refinance auto loans for individuals with bad credit. You have various options, including:

• Traditional banks: Some brick-and-mortar banks work with bad credit borrowers, but requirements can vary.
• Credit unions: Credit unions, which are member-owned, may offer better rates and options for lower credit scores.
• Online lenders: Online-only lenders often have lower operating costs and may provide competitive rates, especially those backed by larger banks.
• Auto loan brokers: Brokers can shop around for refinance offers on your behalf, usually operating online.
• Lending marketplaces: These platforms allow you to enter your information and receive offers directly from providers, making it easy to compare options.

Compare Multiple Offers

It's crucial to gather multiple financing offers and compare them. Interest rates and terms can vary significantly, especially for borrowers with bad credit. While some lenders may take advantage of your situation with high rates, others offer more reasonable terms. Comparing quotes helps you find the best rate suitable for your credit situation.