Most of the time, if you have bad credit, you will have to pay much higher interest rates. It can also hurt your chances of getting an auto refinance. It can make your insurance costs go up. Even though it helps to refinance your car loan early on, and especially before the third or fourth year, it helps much less after the fourth year.
Interest on your car loan is paid when you pay it off early, so as soon as interest rates go down, you should try to refinance your car loan. People with bad credit have to pay very high interest rates, sometimes as high as 20 to 25 percent. It is hard to pay this amount for a long time. People with bad credit can use the following suggestions.
Wait a few months. You should wait at least three to six months after getting your first car loan. After 6 months, you can start looking for companies that will refinance your auto loan. When you refinance, you are not getting a new loan. You are just transferring money from one bank to another. You can lower your APR if you move the loan to a new lender. Most of the time, financial institutions don't mind when someone does something like this.
Ask for help from professionals. If you can't find an auto refinance company on your own, ask for help from professionals. There are many websites that help people with bad credit find auto refinancing.
Pay some of the principal amount. You can get a low APR if you pay some of the principal amount to the bank. This is a good way to get the APR lowered by a few points. You get the benefits of auto refinancing, and you pay off your car loan quickly at the same time.
Keep good bank records for at least 6 months. Most banks and other financial institutions look at your bank records from the past 6 months. So, you should make sure you've paid your bills on time for at least six months before refinancing your car. Then, banks might offer you a better deal to refinance your car loan.
Have a copy of your credit score: Before making a decision, you should always check your credit score. You can get a copy of your credit report online from any of the credit reference agencies, like Experian or Equifax. If you find a mistake, you should contact the agency right away. Many salespeople or loan officers may tell you things that aren't true about your credit score and may charge you more. So, when you're negotiating, you should have your credit report with you.
Another thing I'd do is type something like "car refinance forum" into a search engine and see what comes up. If you find a busy forum, you can ask about the lender you're interested in or ask other users for their suggestions.
Don't apply for loans if your credit score is less than 600 and you keep getting turned down. Your credit score will go down even more because you were turned down. Find a lender who works with people with bad credit.