Unhappy With Car Loan Interest Rate: Solutions to Consider

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - May 5, 2021

If you’re not satisfied with your auto loan interest rate, we’ve got three possible solutions for you to explore.

Changing Your Auto Loan’s Interest Rate

Your credit score is the main determinant of what interest rate you qualify for. Auto lenders have credit score tiers that you’re placed in, and the better your credit score, the lower the interest rate you’re likely to get.

Additionally, the type and age of the vehicle you’re looking to finance can have a say in what interest rate you’re assigned. Newer cars tend to get lower interest rates because they have less of a chance of mechanical failure, making them less of a risk to a lender.

If you’ve gone through the financing process and you got a higher interest rate than you would have liked, then here are three possible solutions you may have available.

1. Refinance the Auto Loan

Refinancing involves replacing your existing auto loan with another for the same vehicle. Borrowers that look for a refinancing lender do so to get a lower monthly payment in nearly every case. This can be accomplished by either lowering the interest rate or extending the loan term. If your credit score is better than what it was when the loan originally started, you may have a shot at changing your interest rate to save money on the car loan.

You may have to wait at least one year before you’re eligible for refinancing, though. Most refinance lenders require that the loan be at least one year old because they want to see how you’ve handled the car loan you were originally approved for. They also require that the vehicle has equity (the car’s worth more than the loan balance) and that you’re current on your loan payments. Other requirements include the vehicle’s condition and age. Lenders typically require that your car have fewer than 100,000 miles and be under ten years of age.

If refinancing is the option you want to explore, check out our trusted partner for more information and connections.

2. Ask for a Loan Modification

Sometimes life gets in the way of repaying your car loan. Unfortunate situations like medical bills, divorce, job loss, or even the addition of a new family member can change your financial stability. If this is the case for you, you may be able to ask your lender for a loan modification.

A loan modification can involve moving your car payment due date to a more convenient date for you, or changing your interest rate to make the loan more affordable. To qualify for a loan modification, you usually need to prove to the lender that the change is necessary with a hardship letter. Not every situation allows for a loan modification. And if you need a change to your car loan, it’s recommended to contact your auto lender at the first sign of trouble for a higher chance of success.

3. Consider a Different Auto Loan

If refinancing or a loan modification isn’t an option for you right now, then selling the vehicle and choosing a more affordable auto loan may be a good course of action.

If you have equity in your vehicle, then you can use that equity to lower the cost of financing another one. Equity can be used as a down payment on your next vehicle, allowing you to finance for less. Additionally, putting money down in the form of cash or trade-in equity can give you some negotiating power with an auto lender, and it could land you a lower interest rate.

You can also start rate shopping right now before you make a move. Rate shopping is when you apply for the same type of loan within two weeks. When you apply for new credit, the inquiry made by the lender hurts your credit score a little, usually around five to 20 points depending on your current credit rating. However, applying for multiple loans of the same type means only one hard pull impacts your credit score instead of many.

Rate shopping gives you the freedom to look for different rates if you’re concerned about paying excessive interest charges and shop for the best rates you can qualify for. If you want a better chance of qualifying for a lower interest rate, there are some tactics you can use to boost your credit score, too.

Let’s Get Your Auto Loan Journey Started!

It’s no secret that bad credit borrowers can struggle to get approved for a low interest rate, and some can struggle to get approved for vehicle financing, period. However, here at CarsDirect, we’re dedicated to assisting bad credit borrowers with finding the resources they need for a car loan.

Using our nationwide network of special finance dealerships that cater to borrowers with credit challenges, we’ll look for a dealer in your local area at no cost. Fill out our auto loan request form today!


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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