Before we get to car refinance, it’s important to understand what score you need to finance it in the first place. Generally speaking, a score above 650 is ideal for getting you good terms and a reasonable interest rate on a car loan. However, anything lower than that is also acceptable depending on who the lender is.
Can I Get a Loan with a Bad Credit Score?
Whether it’s to finance or refinance your car, credit scores matter. However, this does not mean you cannot get a loan with a bad credit score. You may be surprised to know how much a car dealer wants to sell you a car, so the opportunities are endless. Even though we recommend aiming for a credit score above 650, anything below that will also get you a loan – provided you meet other requirements.
Why Does Credit Score Matter?
The reason why lenders place so much emphasis on credit scores is that having a good score lands you a better deal in terms of interest rates. Even if you have a score below 600, you can get a loan, but the interest rate might be higher, costing you more in the long run.
What Happens if I Have a Score Below 650 or 600?
First, you may be questioned about the negative items on your record. A low credit score indicates that you may not be able to pay for the loan on time, which puts the lender in a difficult position.
As much as they want to lend you a loan on ideal terms, they can't do much with a bad credit score. Instead, what you get is a high-interest rate and a longer duration, meaning you will end up paying more money than the car's worth.
What Can I Do If I End up with a Bad Loan?
Auto refinancing is always an option you can consider. However, it also requires a good credit score if you need better terms than your existing loan. Ending up with another bad loan can put you in a difficult position.
Therefore, make sure to improve your credit score by the time you consider auto refinancing. Also, you can avoid getting into a bad loan again by doing your research and shopping around with as many lenders as possible. Who knows what you can get with your existing credit score.