It Revolves Around Your Credit Score

In the world of lending – whether for auto loans or mortgages – having bad credit is the single greatest detriment to getting the best loan terms. However, it is hardly a death sentence, as market competition has given rise to plenty of avenues of inquiry.

In the following, you’ll learn how to refinance your car loan with bad credit, by following a series of steps and making sure things are in order before you confidently head out to see the lenders.

Interest Rate Too High?

This is generally the reason why most people choose to refinance; they’ve found that their monthly payments have become unmanageable. If you’re in this boat, and you still have the bulk of the payments left on your terms, then you know that you’ll need your car for a long time and you must get the payments under control.

Your chances of success are predicated on your credit history; such as whether or not you’ve declared bankruptcy in the past, or if your ratio of credit usage is too high. These attributes and more, of course, will be reflected in your FICO score, as well. You still have the option of refinancing even with bad credit.

It Revolves Around Your Credit Score

This shouldn’t sound quite as ominous as it might have in the past. If you started out with bad credit, but was able to secure a car loan anyway, then you may now have had enough time to raise your credit score. Generally-speaking, you should wait about 6-12 months before seeking to refinance anyway; this is plenty of time for your timely monthly payments to have boosted up your FICO score.

It’s a good idea to refinance early on in the loan anyway, since most loans are loaded such that the bulk of the interest payments occur in the beginning half or one-third of the total term. Once you decide that you’re ready, be sure to research your intended vendor, and gather the following items in preparation:

  • Your SSN and two previous addresses (just to be thorough) as well as, of course, your current address
  • All the pertinent details of the auto loan that you’re currently holding; including how much you’re paying and how much remains to be paid
  • Your places of employment for your last two jobs; along with these, your earnings, tax forms and pay stubs

In addition to the personal information, remember to gather documents denoting the mileage on vehicle in question, as well as the VIN, model, year and brand of car. When you refinance, it counts as a used car loan so the interest rate will naturally be higher than that for a new car. Many times, lenders have limits on the mileage and age of a vehicle, and researching this saves you time and energy.

Find a Lender

There are auto lenders out there who specifically target people with poor credit, so you’re in luck with a bit of research. Use an auto loan calculator to determine the details of a loan that falls within your set budget. Don’t be enticed by the prospect of very low monthly payments for very long payment terms, because all this means you’ll still be paying for a lemon down the line. Your search should begin online with lenders, and then move into the offline space if you’re not receiving the kinds of offers you want.

No matter how bad your credit, you are not alone this day and age. There are lenders out there who are willing to work with you and get a deal done; you just have to find them.

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