If you are struggling to service your monthly expenses and looking for the best way to ease your financial burden, you can opt for refinancing a car with bad credit. Car loan interests, durations, and required monthly payments can take a toll on those with financial challenges. For many, eliminating car loan payment is the best choice to relieve this financial load. However, those living in areas with poor public transport understand the importance of owning a vehicle.
Car refinance for bad credit is increasingly becoming a popular option for vehicle owners with a substantial amount of debt on their banknote but still intend to drive their vehicles for more years. Auto refinancing simply means applying for a new lender to pay off your existing loan and replace it with a new one with pre-agreed terms. The terms could include reduced rates and longer or shorter repayment periods.
Whereas refinancing is not complicated, being approved for interest rates reduction can be difficult, especially if you have been submitting late payments, bankrupt, or have overstretched credit accounts. To prequalify for auto refinance, most lenders check the condition of the vehicle, amount of loan remaining, credit score, current interest rates, and loan term period. Therefore, you should identify your credit score before estimating the interest rates you are eligible for. That said, below is all you need to know about refinancing a car with bad credit.
How to Refinance Your Car?
If your current financial situation dictates that you should pursue refinancing, there are some steps to take. Note that the main goal of refinancing is to lower interest rates and payments. Therefore, begin by checking if your current lender is open to refinancing. If you had taken a loan some years back, you could be eligible for another loan. If your initial loan was specifically designed for bad credit, but you have made payments on time, the lending institution can be open for refinancing to you. Therefore, inquire if the lender agrees.
If they don’t, shop around for the lowest auto refinance rates available. To get a new lender, you should put together all the necessary paperwork before sending applications to new lenders. Lack of proper documentation is a common reason why most auto lenders reject these applications. Lenders have different application procedures. However, all require the following from the applicant;
- Social security number
- Current and previous address
- Employment information – may include current and previous workplaces
- W2s forms for self-employed and wage and earnings form for employed
- Current lending institution and account number bearing the loan
- Current loan balance and repayment amount
- The vehicle’s make, year, model, VIN number and mileage
It is important to note that some lenders have specific requirements on car loans that can disqualify your application. For instance, some lenders do not refinance loans for cars older than 5 years or more than 75,000 mileage. Similarly, you should consider checking your credit score and history before submitting your application. Note that you can still find refinancing with less than stellar credit score. However, identify the best credit score to refinance a car for a seamless application.
When to Apply for Refinancing?
There is no specific best time for refinancing a car with bad credit. However, you should consider applying for refinancing if you are late on payments and qualify for better rates. Most people don’t think about refinancing until the loan becomes a heavy burden. The best idea is to keep updated on what is available and apply for refinancing while the rates are still favorable. Individuals with bad credit should specifically be diligent with this.
Where to Refinance? – Top 3 Auto Loan Refinance Sites
Many lenders can offer refinancing deals. However, some banks market their auto-refinancing deals to individuals with bad credit. Some have loan options and rates that are a good fit for individuals with low budget. Before settling on a lender, it is important to check on the annual interest rates. Ensure that both the annual and monthly interest rates are within your budget and appropriate to pay off the loan within a reasonable time. Long repayment time will leave you making payments for a vehicle whose value has long depreciated past its useful life and loan value.
You should as well look at the loan process of the lender. Physical banks have different application procedures compared to online lenders, such as roadloans refinance. Check if the application is user-friendly, has a good customer service, accommodates online financing, and much more. That said, check out the top auto loan refinance sites you can contact for your motor vehicle refinance needs.
1. Auto Credit Express
Auto Credit Express does not offer direct auto loans. Instead, it provides a sure way of connecting with auto dealers and bad credit lenders. Since they do not provide direct lending, it is difficult to gauge their interest rates and loan terms. However, once you pass their qualification criteria, you are paired with a lender who can service your refinancing deals.
Apart from refinancing a car with bad credit, this company also finances new car purchases and used car purchases.
Like other auto loan dealers, CarLoan.com is tailored to suit individuals with both good and bad credit. The company has been at the forefront in helping auto owners with less than stellar credit for more than 20 years. The platform connects car dealers and lenders looking to provide refinancing services.
To qualify for refinancing loans, you should provide proof of income, which should be between $1000 and $2000 depending on the lender. You should as well provide your proof of insurance, identity, residence, and trade-in documentation.
3. Capital One
If you are looking for a convenient way to get a refinancing lender without affecting your credit score, consider using Capital One. To check if you qualify, fill out the bank’s provided questionnaire. Unlike other financial institutions, this process doesn’t affect your credit score. Apart from those who want to check refinancing rates without affecting their credit score, Capital One is a good option for those who like refinancing options from a well-known lender with an established car dealership network. The pre-qualified offer from the institution also simplifies the buying experience.
Frequently Asked Questions
Q. Can I refinance my car with a 500 credit score?
A. Yes. It is possible to refinance your car with a credit score of 500. You will only attract more interest rates for the deal.
Q. What credit score is needed to refinance a car with Capital One?
A. To get an auto refinance deal with Capital One, you need to have a credit score not less than 540. Your minimum monthly income should also range between $1500 and $1800.
Q. How can I lower my car loan interest rate with bad credit?
A. You can use several ways to lower your auto loan interest with bad credit. First, you can decide to build good credit to help you get started. Review your credit reports at least once annually from the three major reporting agencies. While reviewing, check for inaccuracies and errors that can harm your credit score and dispute them if necessary.
The second option, which is probably the best, is applying for refinancing. It is a popular way of lowering your APR if you already have a car loan. Other methods include applying for a co-signer or co-borrower, finding short loan terms, and negotiating for the APR and interest rates.
It can be frustrating to refinance a car loan, especially if you have bad credit. However, not all is gone as you have several refinance auto loan options for bad credit. There are lenders who specialize in providing auto loans refinancing for car owners with bad credit. When searching for such deals, begin by checking your credit scores and credit reports. Having better credit scores compared to what you had in the previous auto loan application can help in securing low rates.
You should then work with your lender to see if they can provide auto refinancing. If they cannot, try finding a new lender. You should also shop around for better rates even if your current lender offers refinancing services. Compare all the loan aspects to get the best fit. Always prioritize lenders who have a good history of working with individuals with bad credit. Finally, whether approved or denied, you should take steps to improve your credit score. High scores will help you secure loans with low interests.