Can You Refinance a Car if You Are Behind on Payments?

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - December 25, 2019

In order to refinance your car loan, you must be current on your payments. If you’re behind, however, there may be some options your lender can help with to get the loan current. Once that’s taken care of, refinancing might be an option for you.

How Your Lender Can Help

If you’re behind on loan payments, the first thing you should do is contact your lender. In most cases, lenders are willing to work with you if you let them know what’s going on. Believe it or not, lenders don’t want you to default on your loan because it can cost them just as much as it costs you.

Your lender may have several options for you, depending on your situation, but you won’t know until you give them a call. Typically, lenders help by allowing borrowers to defer a payment, which allows you to skip the payment that’s currently due or behind. These payments usually get added to the end of the loan.

Other options that may exist are forbearance, where a lender allows you to pause your payment for a short time, and temporarily lowering your payment. Each lender’s options vary, so the only way for you to take advantage of these temporary solutions is to reach out to your lender.

How Refinancing Can Help

Once you’re caught up, it may be a good idea to consider refinancing if you feel you can’t keep up with your current monthly auto loan payment. Refinancing means you replace your current loan contract with a new one, hopefully with a better interest rate or longer term than you have now.

Auto refinancing is usually done in order to lower the monthly payment. This can be done in one of two ways: by lowering the interest rate, or by extending the loan term. Lowering your interest rate should always be the goal in refinancing, especially if you have a bad credit loan with a high interest rate. Extending your loan term helps, but it only lowers your monthly payment, and actually increases the overall cost of your loan.

You can check with your current lender about refinancing, but it’s typically done with a new lender. In order to do this, you and your vehicle must meet the refinancing qualifications of the lender you’re working with.

Let’s take a look at the typical refinancing requirements:

  • Your credit score must have improved – If you took out a bad credit car loan, your credit score needs to be good or it has to have improved since it started in order to qualify for refinancing. The standard time frame for refinancing a bad credit auto loan is after at least one year has passed. This gives you the opportunity to improve your credit score with on-time loan payments.
  • Your vehicle has to meet refinancing requirements – All lenders have age and mileage requirements for cars. These vary by lender, but it’s typically easier to refinance newer vehicles with lower mileage.
  • There must be equity in your car –In order to qualify for refinancing, there has to be equity in your vehicle – meaning it has to be worth at least what’s owed on the loan.
  • The loan amount has to be acceptable – Lenders have specific amounts that they accept. The loan balance you’re looking to refinance must fall within their acceptable range.

    Now that you know what it takes to refinance your auto loan, you have to find a lender that can help you accomplish the task.

    Finding a Lender to Refinance With

    Though we aren’t a lender, we can still help you along your refinancing journey by connecting you to our refinancing partner. If you don’t meet all the refinancing requirements and instead need a car loan, we can help with that!

    At CarsDirect, we work with a nationwide network of special finance dealerships that have the lending resources to help people that are struggling with credit issues. To see how we can help you, simply fill out our easy, no-obligation auto loan request form, and we’ll get to work matching you with a local dealer!

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    Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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