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 aim is to assist you make better financial decisions by offering interactive tools and financial calculators that provide objective and original 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, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site come from companies that pay us. This compensation could affect how and when products are featured on the site, such as the order in which they may 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 products for home loans. However, this compensation will affect the content we publish or the reviews you see on this site. We do not cover the universe of companies or financial offerings that might be available to you. PeopleImages/Getty Images

4 min read Read Published January 13, 2023

Written by Allison Martin Allison Martin Written by Allison Martin’s career began more than 10 years prior to that as a digital content strategist. She’s been published in several leading financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Editor: Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to manage their finances with concise, well-researched and reliable information that breaks down otherwise complex topics into manageable bites. The Bankrate guarantee

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You have money questions. Bankrate can help. Our experts have been helping you master your finances for over four years. We strive to continuously provide consumers with the expert guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our information is trustworthy and reliable. Our award-winning editors and journalists create honest and accurate content to help you make the right financial choices. The content created by our editorial team is objective, factual and is not influenced through our sponsors. We’re honest about the ways we’re in a position to provide quality information, competitive rates and helpful tools to you by explaining how we earn money. is an independent, advertising-supported publisher and comparison service. We are compensated for placement of sponsored products and services, or through you clicking specific links on our website. Therefore, this compensation may impact how, where and in what order items are listed, except where prohibited by law. This is the case for our mortgage or home equity products, as well as other products for home loans. Other factors, such as our own proprietary website rules and whether the product is offered in the area you reside in or is within your personal credit score could also affect the way and place products are listed on this website. Although we try to offer an array of offers, Bankrate does not include information about each credit or financial item or product. Do your vehicle loan payments stretching your budget thin? You might have thought about refinancing your loan to reduce your payments or maybe get a better interest rate. If your credit score isn’t great, it may not be possible or cost your money. Instead, consider alternatives first. Can I refinance my car loan even if I have bad credit?

While yes, you can refinance an auto loan with bad credit it can put you in a difficult financial spot so it is wise to think about alternatives such as the possibility of requesting loan modification or trade in your vehicle.

The reason you shouldn’t refinance a car loan with bad credit Lenders start a new loan term when you . In reality, you may get a more affordable monthly installment. However, there’s a caveat that if the credit scores have improved after taking out the original loan and you’ve improved it, you’re unlikely to be able to get a better rate of interest. Even worse, you could be paying more over the course of the loan since the lender will have more time to take interest from you. If you need to lower your monthly payment it is possible to do this. Otherwise, stretching out your loan term without scoring an interest rate that is lower could mean paying far more than your car is worth. It’s equally crucial to find out if your current lender has prepayment penalties. If they do, the negatives of refinancing your car loan could outweigh the benefits of a reduced monthly payment. How do you refinance the car loan that has bad credit If you already have a and have decreased the amount you pay for your vehicle, or you absolutely need to lower your monthly payments, refinancing could be worthwhile. Just like buying a new or used car refinancing requires a lot of investigation. Examine your credit credit report and score to avoid any unpleasant surprises prior to looking for a new loan. If you find any incorrect or out of date information, file disputes promptly to the bureaus that handle creditsuch as Experian, TransUnion or Equifax — reporting the incorrect data. You are able to request a copy your credit report at no cost using . Consider your options inquire with your current lender on refinancing possibilities that might be offered to you. Think about credit unions or banks you are currently doing business with. And — like Caribou, RefiJet and Ally — that cater to customers with less than perfect credit might be a viable option. Based on the lender you can be able to check the rate of your loan without impacting your credit score. Bankrate Tip

When you shop, pay attention to your options for repayment and the requirements for approval specifically for the age of your vehicle and mileage.

Request a new loan Before you submit the loan application, gather any documents that the lender will need to expedite the process of reviewing. The majority of lenders will require proof of income, residency , and other information regarding the current loan. Additionally, you will need to provide the mileage as well as the make, model, and vehicle identification number of your vehicle. When you apply, accurately complete the forms to avoid any errors that could cause a rejection of your application. The lender will confirm the information you supply. Close the loan Check and review the loan documents to ensure that 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 transferred direct to your existing lender or to you to allow you to pay off the initial loan off. Bankrate Tip

Contact your lender to find out the date you will begin making payments. From here, you will follow the new monthly payment schedule until you pay off the refinanced loan.

How to boost your credit prior to refinancing your best interest to boost your credit score before refinancing your vehicle loan. The most competitive interest rates are usually reserved for borrowers with good or excellent creditscores. a higher credit score could make the difference between getting an . Here are some tips to make sure you pay your bills on time. Be current on past due obligations. Reduce the amounts 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. You should also keep track of your credit score to keep track of your progress. Certain credit card companies or lenders will provide free credit checks on your monthly statements. If not, you’ll have to check them infrequently or paying to see your score. Alternatives to car loan refinancing There are other options available in the event that you analyze the data and decide refinancing your car loan isn’t a smart decision for your financial situation. You can trade it in. Depending on what the car is worth and what is due on the current loan it is possible to trade it in for a cheaper alternative and then take the remaining balance and roll it into a new loan. Request modification. Since most lenders don’t change their loans You can request this in the form of . This allows you to adjust payment terms — 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 facing short-term financial hardship, but it is an alternative. You may be able to skip up to three months of payment. But, they’ll be added on to the end to your loan and you’ll incur interest. Adjust your budget. If you’re in the process of doing so, think about adjusting your budget to make your payments easier to afford until you qualify to refinance. It is also advisable to increase your credit score in the meantime to get an improved interest rate in the event of applying for an additional loan. The bottom line Unless you’re experiencing financial hardship and risk having an issue if you are unable to lower your cost of the loan, refinancing a mortgage using bad credit may not be a healthy financial decision. Instead, consider alternatives such as adjusting your spending plan to temporarily get your credit and finances back in order. It’s also possible to trade your car in for a more affordable ride, depending on how much it’s worth.


Allison Martin’s writing began more than 10 years ago as a digital content strategist, and she’s since been featured in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to take control of their finances by providing concise, well-studied facts that break down otherwise complicated topics into digestible pieces.

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