What is Auto Refinancing?

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Even with poor credit.

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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.


, - April 19, 2018

Refinancing is when a borrower replaces an existing loan with a new one, which can save money with a lower interest rate.

Benefits of Refinancing a Car Loan

While finding the right time to refinance will be different for everyone, it’s important to wait before jumping into another loan. Borrowers who attempt to refinance too early will more than likely either be denied, or won’t get a much better rate than their current loan.

When a borrower with bad credit waits for their credit score to improve, refinancing could:

  • Save money on interest – One of the biggest benefits bad credit borrowers look for when refinancing is a lower interest rate. Interest rates are dependent on the Federal Reserve, but what a specific borrower is able to qualify for is also dependent on their credit. If the borrower’s credit score has improved and the market rate hasn’t gone up too much, it’s possible to get a better interest rate, which will help save money for the remainder of the loan.
  • Shorten or increase the loan term – When a borrower refinances, they’re given a brand new car loan. A borrower can adjust the length of the new loan to fit their needs. If a borrower wants to pay off the loan sooner, and has the funds to do so, they can shorten the loan, but if they can’t afford their current payment, increasing the term will lower the monthly payments.

Bottom Line

There are many reasons why a borrower may choose to refinance, but in order to successfully refinance, some time will need to pass after taking out the initial loan. Not everybody can get a great rate in their initial loan, but refinancing can solve this problem. If you’ve waited long enough, and are ready to find a better rate on an auto loan, it may be time to consider refinancing.

On the flip side, if you're dealing with bad credit, no credit, or other credit issues and are looking for a car loan, CarsDirect wants to help. We're teamed up with a nationwide network of car dealers that know how to work with consumers in unique credit situations, and we want to connect you with a dealer near you. Get the process started by filling out our auto loan request form today.

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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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