Most people refinance their car loans to get a lower interest rate or to shorten the length of the loan. But if you have bad credit, it may be hard to refinance your car at a low rate. Most of the time, only prime applicants can get prime rates from lenders. In other words, if you have good credit, you have a good chance of getting a good refinance loan. Yet, with a little searching and effort, you can secure a decent auto loan with poor credit
Why Do People Refinance an Auto Loan?
Those unfamiliar with the car buying process may accept a bad loan. A high interest rate on the first loan is a common problem. A person with good credit can usually get an auto loan with an interest rate of about 6 percent, or maybe even less. If you just declared bankruptcy, the rate of interest could go up to 18 percent.
At first, you may not have much to choose from. Still, as time goes on, you may be able to get a lower rate. Even if you have bad credit, it's unlikely that you'll be able to get prime rates. However, you might be able to get an interest rate that is two or three percentage points above the norm.
How to Refinance a Car Loan Even if You Have Bad Credit
Before you start the process of refinancing, you should look over your credit report. Since you got the first car loan, your credit may have gotten better. If so, you might be able to get similar low rates. Even if your credit score hasn't gone up, you should still try to refinance. If you switch to a lender with a lower rate, your monthly payments could go down.
If you don't have to be somewhere right away, take some time to fix credit problems. Small things like paying off old bills and lowering debts can make a big difference.
Refinancing auto loans must be done with a different lender. You can choose from a number of lenders. Whenever it's possible, use the Internet. To get a good refi loan, you need to compare different offers. So, working with an online auto loan broker could be helpful. After you fill out an online application, the broker will send you quotes from possible lenders through email. If the lender's terms aren't good enough, you might want to try again with a co-borrower. This strategy could help you get a good offer for a loan to help you refinance. Of course, if you want a low rate, the co-borrower must have good credit.
