Can I refinance a vehicle loan with 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 mission is to help you make better financial decisions by offering interactive tools and financial calculators as well as publishing original and impartial content. This allows users to conduct studies and analyze information for free – so that you can make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies that compensate us. This compensation can affect the way and when products appear on this website, for example, for example, the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law for our mortgage or home equity products, as well as other home lending products. But this compensation does affect the content we publish or the reviews that you read on this site. We do not cover the entire universe of businesses or financial offers that may be accessible to you. PeopleImages/Getty Images

4 min read Published 13 January 2023

Written by Allison Martin Written by Allison Martin’s work began over 10 years ago as a digital media strategist. She’s been featured in numerous leading financial media outlets, such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Edited by Rhys Subitch The editor is Auto loans Editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to manage their finances by providing precise, well-researched, and well-researched data that breaks down complicated topics into manageable bites. The Bankrate promise

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There are money-related questions. Bankrate has the answers. Our experts have been helping you manage your finances for more than four years. We strive to continuously give our customers the right advice and tools needed to be successful throughout their financial journey. Bankrate follows a strict standard of conduct, which means that you can be sure that our information is trustworthy and precise. Our award-winning editors and reporters create honest and accurate content to help you make the right financial choices. The content created by our editorial staff is objective, factual and uninfluenced through our sponsors. We’re honest about how we are able to bring quality content, competitive rates, and helpful tools to you , by describing how we earn money. is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and, services, or by you clicking on certain links posted on our site. So, this compensation can affect the way, location and in what order items are listed, except where prohibited by law. We also offer mortgage home equity, mortgage and other home loan products. Other elements, such as our own website rules and whether the product is available within the area you reside in or is within your self-selected credit score range may also influence the manner in which products are featured on this site. Although we try to offer an array of offers, Bankrate does not include information about each credit or financial products or services. Have your auto loan payments stretching your budget? You may have considered refinancing to lower your payment or perhaps get a lower interest rate. But if your credit score isn’t great, it might not be feasible or even save your money. Instead, consider alternatives first. Can I refinance my car loan with bad credit?

Although you are able to refinance the car loan even with bad credit it can put you in a precarious financial spot so it is wise to think about alternatives such as the possibility of requesting loan modification or selling your car.

Why you shouldn’t refinance a car loan using bad credit Lenders start a new loan term once you . In practice, you could get a more affordable monthly payment. However, there’s one caveat that if your credit score has improved since you took the initial loan but you’re not likely to be able to get a better rate of interest. In addition, you may be paying more over the course of the loan since the lender has more time to get the interest. If you want to reduce your monthly payment, this can work. If not, extending the loan duration without getting a lower interest rate may cost you more than what your car is worth. It’s equally important to determine whether your current lender has prepayment penalties. If they do, the negatives of refinancing your auto loan may outweigh the advantages of a lower monthly payment. How do you refinance the car loan that has bad credit If you already have a credit score that has decreased since you purchased your vehicle, or you absolutely need a lower payment, refinancing could be worthwhile. Just like buying an used or new car the process of refinancing involves a lot of investigation. Make sure you review your credit score and report to stay clear of any unpleasant surprises prior to shopping for an additional loan. If you notice any inaccurate or out-of-date data, make a complaint immediately to the bureaus that handle credit– Experian, TransUnion or Equifax reporting the wrong information. You can request a copy of your credit report for free by contacting . Consider your options inquire with your current lender about refinancing possibilities that might be available to you. Think about credit unions or banks you are currently doing business with. As well as Caribou, RefiJet and Ally that are geared towards consumers with less than perfect credit may also be an alternative. Depending on the lender you can be able check the rate of your loan without impacting the credit rating. Bankrate Tip

When shopping pay close at the conditions for approval and repayment options — especially in relation to your car’s age and mileage.

Request a new loan Before submitting a loan application, gather any documents that the lender will need to expedite the review process. The majority of lenders will require documents proving your income, residency , and other information about the current loan. It is also necessary to provide the mileage, make, model and vehicle identification number for your car. When applying, you must ensure that you fill out the form correctly to avoid any ambiguities that could cause a rejection to your request. The lender will verify the information you have provided. Close the loan Check and review the loan documents to ensure the conditions and terms are acceptable to you. If so, sign on the dotted line in order to close the loan. The money will be sent straight to the current lender as well as to your current lender in order to pay off the initial loan off. Bankrate Tip

Check with your lender to find out the date you will begin making payments. From here, you will adhere to the new monthly installment schedule until you have paid off your refinance loan.

How can you improve your credit score before refinancing It is in it’s best interest for you to boost your credit score prior to refinancing your car loan. The most competitive interest rates are typically reserved for borrowers with good or outstanding credit scores, and an improved credit score can make the difference between getting an . Here are some ways to pay all your bills promptly. Get current on any past-due debts. Reduce the amount of your credit card balance to 30 percent or less than the credit limit. Don’t close your old credit accounts. Only apply for new credit when you need to. It is also important to be aware of your credit score in order to keep track of your growth. Some credit cards or lenders will offer you free credit checks with your monthly statement. Otherwise, you may need to check frequently or making payments to check your score. Alternatives to car loan refinancing Other options are available when you look at the numbers and decide that refinancing your car loan isn’t a smart financial move. You can trade it in. Based on the value of your vehicle is worth and how much is due for the loan it is possible to trade it into a less expensive option , and even 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 rates — without having to go through a whole new application procedure. It is possible to defer payments. This option is only available if you’re experiencing financial hardship in the short term However, it’s an alternative. You may be able to take a break of up to three months of payments. But, they’ll be added on to the end to your loan and you’ll incur interest. Adjust your budget. If you are , consider adjusting your budget to make your payments less expensive until you are eligible for a refinance. Also, you should increase your credit score in the meantime in order to secure an interest rate that is better in the event of applying for an additional loan. If you’re facing financial difficulties and are at risk of having to pay a penalty if you can’t lower the payments, refinancing on bad credit may not be a healthy financial decision. Instead, look into alternatives, such as adjusting your spending plan for a short period until you can have your finances and credit back on track. Or you may be able to sell your car for a more affordable ride depending on the value it’s worth.


Written by Allison Martin’s work began over 10 years ago, as an online content strategist and she’s since been published in several leading financial outlets which include The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain confidence to take control of their finances through providing clear, well-researched details that cut otherwise complicated topics into digestible pieces.

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