It is possible to refinance a car with bad credit. When you refinance a loan and have bad credit, you have the ability to increase or decrease your term of the loan and can also reduce the rate that you're paying for interest. However, it is important to know the best way to refinance a car loan and how to get the lowest payments possible.
Step 1: Current Auto Loan Provider
Before you do anything else, you need to contact your current auto loan provider and check the remaining balance of your loan. You cannot refinance a loan with bad credit if you don't know what the exact balance is. You can obtain this information by speaking with a customer service representative at your lending agency, or you can find the balance on your most recent loan statement.
Step 2: Value of Car
You need to determine what your car is worth. If you want to qualify for bad credit financing, your car has to be worth more than what you still owe on the loan. The easiest way to find the current value of your car is to check the official Kelley Blue Book. Most lenders have a copy of the book and can show you the current value of your vehicle.
Step 3: Payment Times
If you want to refinance with no credit or poor credit, remain in good standing with the payments to your current lender. If you have payments that are always arriving late or have missed car payments, it may be impossible for you to get a refinance loan. While some lenders will approve applicants with bad credit, they are much less likely to approve an applicant that has skipped car payments or has not made their payments on time. Making sure that payments are made by the date they are due is a huge mark in your favor when trying to refinance an auto loan.
Step 4: Sub-Prime Lender
Look for a lender that is sub-prime. If you have a bad credit score, you want to avoid prime lenders. Instead, you should look into sub-prime, otherwise known as high-risk lenders. These lenders work specifically with individuals that have bad credit. They have a variety of different loan types to help these individuals refinance their auto loans.
Step 5: Research
Do your homework and proper research. Looking into several different lenders and finding the one with the most to offer can save you the most money. Compare the terms and interest rates that different lenders are willing to offer you. Individuals with bad credit especially need to look at all of their options and not take the first refinance loan that comes along. There are lenders that raise their interest rates on purpose to trap those with poor credit, and these consumers then find themselves with a loan that costs more than what the car they got is worth. Ideally, you should get terms and rates from at least three high-risk lenders before making a decision.