If your current payment terms make it hard for you to make on-time payments, you may want to explore the market again and consider a car loan refinance. It’s not impossible to land a loan with a bad credit rating. However, it may accompany its own set of challenges. While most lenders prefer borrowers with a high credit score, others also specialize in refinancing loans for clients with poor credit ratings.
Is It Possible to Refinance Your Auto Loan With Bad Credit?
Refinancing is an option you can always explore, but you may not be able to land the best terms and interest rate if your credit hasn’t improved since you received the original loan. The rule is, the higher your credit score, the lower your interest rate, and vice versa. However, if auto refinance is the only choice you’re left with, here’s how to go about it.
Review Your Credit Reports
Reviewing your credit reports before you go ahead with a refinancing application allows you to look for all the loopholes and incorrect information, so you’re able to dispute those errors. Inaccuracies are among some of the factors you can expect to bring your credit score down. Moreover, if you’ve filed for bankruptcy before, you may want to shop around for lenders who are willing to refinance loans with bankruptcy mentioned in the credit history.
Do You Need a Certain Score to Qualify For an Auto Refinance?
Fortunately or unfortunately, there is no standard credit score one needs to have to qualify for a refinance. Different lenders have different requirements, and some of them specifically specialize in dealing with people who have repossessions, bankruptcies, and bad credit on their reports.
Speak to Your Current Lender
Before you look for a new lender, you may want to explore the opportunity to refinance with the same lender. If your score has improved recently or if the auto loan rates have considerably gone down and if you have a loan in good standing, your current lender may be willing to refinance your auto loan.
Again, even if your existing lender can refinance your loan, it’s better to shop around and compare different offers. This way, you’ll be able to land a loan as per your budget and needs.
The Bottom Line
Car loan refinance is effective out of coming out of a deal that no longer fits your financial standing. However, landing a better deal with a bad credit score may not always be possible. Hence, you should focus all your efforts on showing considerable improvement in your credit reports before getting out there and applying for a refinance.
Once a lender sees how far you’ve come and improved, they may be willing to refinance your loan for a lower interest rate. In the end, your credit score may not be the only determinant, but it is one of the most important ones, especially if you’re looking for a lower interest rate.