How to Refinance a Car Loan when You Have Bad Credit

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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.


, - June 11, 2019

In order to refinance a bad credit car loan, you need two things: time and credit improvement. Lenders typically require at least a year to have passed since originally taking out your loan, but you should give yourself as much time for credit improvement as you can. If you have already met those two requirements, there are a few simple steps you need to follow to refinance an auto car loan with bad credit.

How to Refinance a Bad Credit Car Loan

The first step to refinancing a bad credit car loan is to check your credit score to make sure there's been some improvement since taking out your auto loan. Usually, you can get your credit scores for free through your bank or credit union, or by checking if your credit card company provides this service. If these options aren't available, you can purchase your FICO credit scores (including the score used by most auto lenders) for a small fee at myFICO.com.

If there's been enough improvement to qualify for a new loan on your vehicle, you should check with your current loan provider to see if they're willing to refinance your car. Just as all lenders can’t provide bad credit auto loans, not all offer refinancing. If your lender can't help, you can look for refinancing through other lenders.

When shopping for rates and terms for refinancing a bad credit car loan, it's best to keep your inquiries within a 14-day time frame in order to minimize the impact on your credit score. This is known as the "rate shopping window," and loan inquiries that you request for the same type of loan all count as one hard inquiry instead of several.

Is Refinancing Right for You?

Sometimes, after you take out a bad credit auto loan, your situation changes and you can no longer afford your loan as it originally was written. If you want to keep the vehicle but need to change the terms of your loan, this is refinancing – you're replacing the existing loan with a new one, often with a different lender.

Refinancing may be right for you if you're looking to lower your monthly payment by either:

  • Stretching out your loan term – This means you're going to be paying for your car for a longer time, so you need to be careful about how long you make it. The monthly payments are going to be lower, but you're going to pay more in interest charges, which raises the overall cost of your loan.
  • Getting a lower interest rate – Improved credit often means you qualify for a lower APR on your loan, which can save you money in the long run by decreasing the interest charges.

If either one of these sounds like your situation, then refinancing might be right for you. However, if these options aren't appealing to you, or you're looking for a different vehicle, you might need a subprime lender to help you with a bad credit car loan.

Getting the Car Loan You Need

If refinancing isn't for you right now, or you're unable to qualify at this time, you can either wait until your credit has improved even more, or you can use your existing vehicle as a trade-in on something more affordable.

When you don't know where to go for a lender that can help you get a new loan with bad credit, we can help. Here at CarsDirect, we work with a nationwide network of special finance dealers that have lending resources available to work with people in many types of credit situations. We can help you find a local dealership with the right lenders where you can trade in your vehicle and qualify for the loan you've been looking for!

The process is fast, free, and easy. Simply fill out our auto loan request form and we'll start working to match you with a dealer in your area. What are you waiting for? Get started right now!

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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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