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Can I refinance a car loan when I have bad credit? Part Of Refinancing a Car Loan In this series Refinancing a Car Loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling users to conduct research and compare information for free to help you make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site come from companies who pay us. This compensation can affect the way and when products appear on the site, such as for instance, the order in which they appear in the listing categories and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other home lending products. However, this compensation will affect the information we provide, or the reviews you read on this site. We do not contain the entire universe of businesses or financial offers that may be available to you. PeopleImages/Getty Images
4 min read Published 13 January 2023
Written by Allison Martin Written by Allison Martin's career began more than 10 years ago as a digital content strategist. She's been featured in numerous leading financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Editor: Rhys Subitch The editor is Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers gain confidence to control their finances with precise, well-researched, and well-researched data that breaks down complicated subjects into bite-sized pieces. The Bankrate guarantee
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You have money questions. Bankrate can help. Our experts have been helping you manage your money for over four years. We are constantly striving to provide our readers with the professional guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards standard of conduct, which means that you can be sure that our content is honest and precise. Our award-winning editors and journalists provide honest and trustworthy information to assist you in making the right financial choices. Our content produced by our editorial team is objective, factual, and not influenced through our sponsors. We're transparent about the ways we're in a position to provide quality content, competitive rates and useful tools for you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods and, services, or through you clicking specific links on our site. So, this compensation can impact how, where and in what order items appear within listing categories, except where prohibited by law. We also offer mortgage or home equity products, as well as other home lending products. Other factors, like our own rules for our website and whether a product is offered in your region or within your own personal credit score can also impact how and where products appear on this site. Although we try to offer a wide range offers, Bankrate does not include specific information on every credit or financial item or product. Are your car loan payment putting your budget? You might have thought about refinancing your loan in order to lower your monthly payments or maybe get a better interest rate. If your credit score is low, it may not be possible or even save your money. Instead, consider alternatives first. Can I refinance my car loan even if I have bad credit?
While yes, you can refinance the car loan even with bad credit it can put you in a financial precarious situation, so it's best to first consider alternatives like requesting loan modification or trading in your car.
Why you shouldn't refinance the car loan with bad credit Lenders start a new loan term when you . In reality, you may get a more affordable monthly payment. But there's a catch that if you have improved your credit rating since you took out the initial loan, you likely won't be able to get a better rate of interest. In addition, you may pay more over the life of the loan due to the fact that the lender will have more time to collect interest from you. If you need to lower your monthly payment you can do it. In other cases, prolonging the loan duration without getting an interest rate that is lower could mean paying far more than the vehicle is worth. It's also important to know whether your current lender has prepayment penalties. If it does, the disadvantages of refinancing your auto loan might outweigh the benefits of a lower monthly payment. Refinancing the car loan for those with bad credit If you already have a credit score that has decreased the amount you pay for your vehicle or you are in need of a lower payment it could be worth refinancing. Similar to shopping for new or used cars refinancing requires a lot of study. Examine your credit credit score and report to avoid any unpleasant surprises prior to searching for a new loan. If you find any incorrect or outdated data, make a complaint immediately with the credit bureaus- Experian, TransUnion or Equifax and report the inaccurate data. You can request a copy of your credit report free of charge by contacting . Explore your options You can inquire with your current lender on refinancing possibilities that might be offered to you. Consider banks or credit unions you are currently doing business with. As well as Caribou, RefiJet and Ally that are geared towards customers with less than perfect credit may be a viable alternative. If you are a lender, you may be able check your rate without affecting your credit score. Bankrate Tip
When shopping pay close at the conditions for approval and repayment options specifically for your vehicle's age and mileage.
Apply for a new loan Prior to submitting the loan application, collect any documents the lender needs to speed up the process of review. Most will request evidence of your the income, residency and details regarding your current loan. Additionally, you will need to provide the mileage in addition to the make, model, and the vehicle identification number for your vehicle. When applying, you must be sure to fill in the correct information on the application forms to avoid any errors that could result in a denial to your request. The lender will confirm the information you provide. Finalize the loan Review the loan documents to ensure that the conditions and terms are acceptable to you. If yes, you must sign the dotted line to complete the loan. The money will be sent direct to your existing lender or to you to allow you to pay off the initial loan off. Bankrate Tip
Check with your lender to see the date you will begin making payments. From here, you'll follow the new monthly payment schedule until you have paid off your refinanced loan.
How to improve your credit before refinancing It is in the best interests of you to increase your credit score prior refinancing your vehicle loan. The lowest interest rates are generally offered to borrowers with excellent or outstanding credit scores, and an improved credit score can mean the difference between getting the loan or not . Here are some tips to pay all your bills in time. Be current on past due loans. Reduce the amount of your credit card balance by 30 percent to less than 30% of your credit limit. Do not close credit accounts that you have closed. Only apply for new credit as needed. It is also important to monitor your credit score to track your growth. Some credit cards or lenders will offer you free credit checks on your monthly statements. Otherwise, you may need to rely on checking frequently or making payments to see your score. Alternatives to the car loan refinancing There's a variety of options if you run the numbers and determine that refinancing your car loan isn't a smart financial move. You can trade it in. Based on the value of your vehicle is worth and how much is due to the loan it is possible to trade it into a less expensive alternative and then roll the outstanding balance into an entirely new loan. Request a modification. Since most lenders don't refinance their own loans You can request this in the form of . This lets you adjust payment terms -- and sometimes interest rates -without going through a whole new application procedure. It is possible to defer payments. This option is only available when you're in a financial crisis that is short-term, but it is an option. You can cut off up to 3 months of installments. But, they'll be added onto the final month to your loan and you will still being charged interest. Make adjustments to your budget. If you're struggling , consider changing your budget so that your monthly payments are more affordable until you qualify to refinance. You should also increase your credit score in the meantime in order to secure an interest rate that is better when you apply for a new loan. If you're experiencing financial hardship and are at risk of having to pay a penalty problems if you don't reduce the cost of the loan, refinancing a mortgage using bad credit may not be the best financial option. Instead, look into alternatives, like adjusting your spending plan temporarily until you get your finances and credit back to normal. You may also be able to exchange your vehicle for a more affordable ride, depending on how much it's worth.
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Allison Martin's writing began more than 10 years ago, as an online content strategist and she's since been featured in a variety of top financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to manage their finances with concise, well-studied facts that break down complex topics into manageable bites.
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