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Can I refinance a vehicle loan when I have bad credit? Part Of Refinancing a Car Loan In this series Refinancing a Car Loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive financial calculators and tools that provide objective and original content. We also allow users to conduct research and compare data for no cost – so that you can make sound financial decisions. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site are from companies who pay us. This compensation may impact how and when products are featured on the site, such as the sequence in which they appear in the listing categories and other categories, unless prohibited by law for our mortgage home equity, mortgage and other products for home loans. But this compensation does not influence the information we provide, or the reviews that you see on this site. We do not include the entire universe of businesses or financial deals that could be accessible to you. PeopleImages/Getty Images

4 minutes read. Published 13 January 2023

Written by Allison Martin Allison Martin Written by Allison Martin’s work began over 10 years prior to that as a digital content strategist, and she’s since been featured in a variety of top financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Written by Rhys Subitch The editor is Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances through providing clear, well-researched information that breaks down complex topics into manageable bites. The Bankrate guarantee

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There are money-related questions. Bankrate has answers. Our experts have been helping you manage your finances for more than four years. We strive to continuously give our customers the right guidance and tools required to succeed throughout life’s financial journey. Bankrate adheres to strict standards standard of conduct, which means that you can be sure that our content is honest and reliable. Our award-winning editors and journalists provide honest and trustworthy information to assist you in making the best financial decisions. Our content produced by our editorial staff is factual, accurate and is not influenced from our advertising. We’re open regarding how we’re in a position to provide quality information, competitive rates and helpful tools to our customers by revealing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for the placement of sponsored products and, services, or through you clicking specific links that are posted on our site. Therefore, this compensation may impact how, where and in what order items are listed and categories, unless it is prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own rules for our website and whether or not a product is offered in your area or at your self-selected credit score range could also affect how and where products appear on this site. We strive to provide the most diverse selection of products, Bankrate does not include information about every financial or credit product or service. Are your car loan payment putting your budget? Perhaps you’ve thought about refinancing your loan to reduce your payments or perhaps get a lower interest rate. If your credit score is not high, it isn’t likely to work or cost your money. Instead, consider alternatives first. Can I refinance my car loan even if I have bad credit?

Although you are able to refinance the car loan with bad credit it can put you in a financial precarious spot so it is wise to consider other options first, such as requesting loan modification or trade in your car.

Why you shouldn’t refinance a car loan using bad credit Lenders start a new loan term when you . In practice, you could get a more affordable monthly payment. But there’s a catch: Unless you have improved your credit rating since taking out the original loan but you’re not likely to receive a lower interest rate. And, even more importantly, you might have to pay more for the duration of the loan since the lender will have longer to take interest from you. If you need to lower your monthly payment you can do it. In other cases, prolonging your loan time frame without securing an interest rate that is lower could result in paying more than the vehicle is worth. It’s also important to know whether your current lender is penalized for prepayment. If it does, the disadvantages of refinancing your car loan might outweigh the benefits of a lower monthly payment. Refinancing a car loan with bad credit If you already have a and have decreased since you purchased your vehicle, or you absolutely need an easier payment, refinancing could be worthwhile. Similar to shopping for a new or used car the process of refinancing involves a lot of study. Check your credit Review your credit report and score to avoid any unpleasant surprises before shopping for an additional loan. If you find any incorrect or out of date data, make a complaint immediately at the three credit bureaus — Experian, TransUnion or Equifax — reporting the incorrect data. You can request a copy of your credit report at no cost by contacting . Explore your options You can consult with your current lender on refinancing options that may be open to you. Think about credit unions or banks you are currently doing business with. Also, like Caribou, RefiJet and Ally that are geared towards those with less-than-perfect credit could be a viable alternative. Based on the lender you can be able check your rate without affecting the credit rating. Bankrate Tip

When you shop, pay at the conditions for approval and repayment options particularly for the age of your vehicle and mileage.

Apply for a fresh loan Before you submit the loan application, collect any documents that the lender requires to expedite the review process. They will typically require proof of income, residency , and other information about the current loan. It is also necessary to provide the mileage in addition to the make, model, and the vehicle identification number for your car. When you apply, accurately complete the forms to avoid discrepancies that can cause rejection or rejection of the application. The lender will verify the information you have provided. Close the loan Check your loan documents to make sure the conditions and terms are acceptable to you. If yes, you must sign the dotted line in order to close the transaction. The funds will either be transferred directly to your current lender and/or to you so that you can pay off the initial loan off. Bankrate Tip

Contact your lender to see when you begin making payments. From here, you’ll follow the new monthly payment schedule until the time you are able to pay off the refinanced loan.

How can you improve your credit score prior to refinancing the best interests of you to boost your credit score before refinancing your car loan. The best interest rates are generally reserved for borrowers with good or excellent credit, and having a better credit score could be the difference between obtaining the loan or not . Here are some practical ways to : Pay all your bills on time. Make sure you are current on all past due debts. Reduce the balances on your credit cards at 30 percent, or less than your credit limit. Don’t close old credit accounts. Only apply for new credit as required. It is also important to monitor your credit score to track your improvement. Some credit cards or lenders will provide free credit reports with your monthly statements. In other cases, you might have to check them infrequently or paying to view your score. Alternatives to the car loan refinancing There’s a variety of options available if you run the numbers and decide that refinancing your vehicle loan isn’t a smart financial move. You can trade it in. Based on the value of your vehicle is worth and the amount that is owed for the loan, you could trade it in for a cheaper alternative and then take the remaining balance and roll it into a new loan. Request a modification. Since most lenders do not refinance their own loans, you would apply for this type of . This permits you to alter the terms of your payment — and, sometimes, interest rateswithout having to go through a new application process. Defer payments. This option is only available if you’re experiencing financial hardship in the short term However, it’s an alternative. It is possible to cut off up to 3 months of payments. But, they’ll be added on to the end to your loan and you will still be accruing interest. Make adjustments to your budget. If you’re in the process of doing so, think about adjusting your budget so that your monthly payments are more affordable until you qualify for a refinance. You should also increase your credit score in the meantime to get an improved interest rate when you apply for an additional loan. The main thing to remember is that unless you’re facing financial difficulties and risk having problems if you don’t reduce the amount of payments, refinancing with bad credit may not be a healthy financial decision. Instead, look into alternatives, like adjusting your spending plan to temporarily are able to get your finances and credit health back to normal. You may also be able to exchange your vehicle for a more affordable ride, depending on how much it’s worth.

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Written by Allison Martin’s work began over 10 years ago as an expert in digital content, and she’s since been published in several leading financial outlets which include The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.

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