Can I Refinance a Used Car?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - August 19, 2019

If you took out a bad credit auto loan on a used car, and you’re looking to refinance for a better rate, is it possible? It certainly is, as long as your vehicle – and you – meet the lender’s refinancing requirements.

Vehicle Refinancing Requirements

Not every car qualifies for refinancing, and this could be a concern if you ended up taking out a loan for a used vehicle. How do you know if your car qualifies for refinancing? Although the specifics vary by lender, there are three requirements your vehicle typically needs to meet in order to qualify for refinancing:

  1. Can’t be upside down – You must have equity in the auto loan – aka, your car must have an actual cash value that’s equal to, or more than, the loan balance. If it’s worth less, then you have negative equity – you’re upside down in the loan – and you probably aren’t going to get approved for refinancing.
  2. Must meet age and mileage requirements – Just how old the vehicle can be, and how miles it can have, varies by lender. However, most lenders don’t approve cars for refinancing if they’re over 10 years old and/or have over 100,000 miles on the odometer.
  3. Vehicle type must meet the requirements – If your car carries a salvage or rebuilt title, or it is for commercial use, the lender isn’t going to accept it for refinancing.

Refinancing Requirements You Need to Meet

Now that you know what it takes for your vehicle to qualify for refinancing, what about you, the borrower? You must also qualify for refinancing. While you usually can’t refinance a car loan immediately after taking out the first loan, and typically need to wait at least a year, you can prepare for it ahead of time by knowing what you need to qualify:

  • Your credit score has to have improved – This is a big one. If your credit hasn’t improved since taking out the original loan, you can usually expect to be turned down for auto refinancing. In rare cases, it’s possible to refinance with bad credit, but you shouldn’t bank on the idea of it.
  • Must be current with your payments – You must be current on all monthly payments for your vehicle. Any delinquencies puts you at a greater risk of being turned down.
  • Loan amount must fall within the lender’s limits – The balance that’s going to be refinanced must fall within the lender’s acceptable range. The range varies by lender, and includes a minimum and maximum cap.

CarsDirect Tip: If your credit hasn’t improved much since taking out the initial loan, but you need to save money on the monthly payment, it doesn’t hurt to try and refinance to extend the loan term. As we mentioned before, it’s not common for people with bad credit to qualify for refinancing, but some lenders are willing to work with you if you’ve been consistent with your monthly payments.

The Bottom Line

The only way you’re going to know if you and your used car qualify for refinancing is if you rate shop. No two lenders are the same, and what one lender can offer you another lender may be able to beat.

If you’re ready to refinance your auto loan, our refinancing partnership can help you find a place to refinance your vehicle. If you’re just looking for a bad credit car loan, CarsDirect can help you out.

We work with a nationwide network of dealerships that have the lending resources available to handle unique credit situations. Just fill out our free-of-cost, no-obligation auto loan request form, and we’ll get right to work connecting you to a dealer.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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