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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 better financial choices by offering you interactive financial calculators and tools as well as publishing original and impartial content. We also allow you to conduct research and analyze information for free and help you make informed financial decisions. 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 deals that are displayed on this site are from companies that pay us. This compensation may impact how and where products appear on the site, such as, for example, the order in which they appear within the listing categories and other categories, unless prohibited by law. Our mortgage, home equity and other home lending products. This compensation, however, does not influence the content we publish or the reviews appear on this website. We do not contain the universe of companies or financial deals that could be open to you. PeopleImages/Getty Images

4 min read Read Published 13 January 2023

Written by Allison Martin 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 outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to control their finances with precise, well-researched, and well-researched data that breaks down complex subjects into bite-sized pieces. The Bankrate promise

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You have money questions. Bankrate has the answers. Our experts have helped you understand your finances for over four decades. We continually strive to provide our readers with the professional guidance and the tools necessary to make it through life’s financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our content is honest and precise. Our award-winning editors, reporters and editors provide honest and trustworthy content that will help you make the best financial decisions. The content we create by our editorial staff is factual, accurate and is not influenced by our advertisers. We’re transparent about the ways we’re capable of bringing high-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 receive compensation for the placement of sponsored products and, services, or by you clicking on specific links that are posted on our website. Therefore, this compensation may influence the manner, place and in what order products are listed and categories, unless it is prohibited by law. We also offer mortgage home equity, mortgage and other home loan products. Other factors, like our own rules for our website and whether a product is available in your region or within your personal credit score may also influence how and where products appear on this site. We strive to provide an array of offers, Bankrate does not include specific information on every credit or financial products or services. Are your car loan repayments putting your budget thin? You might have thought about refinancing to lower your payment or possibly get a better interest rate. But if your credit score isn’t great the refinancing may not be possible or cost you money. Instead, consider alternatives first. Do I have the option of refinancing a car loan with bad credit?

While yes, you can refinance an auto loan with bad credit it can put you in a precarious financial situation, so it’s best to first consider alternatives like asking for loan modification or trading in your vehicle.

There are many reasons to not refinance a car loan that has bad credit Lenders start a new loan period when you . In practice, you could obtain a less expensive monthly installment. However, there’s one caveat that if your credit score has improved since taking out the initial loan but you’re not likely to get a better interest rate. Even worse, you could be paying more over the course of the loan since the lender will have more time to get the interest. If you want to reduce the monthly amount you pay, this can work. In other cases, prolonging your loan duration without getting the lowest interest rate could cost you more than your car is worth. It’s equally crucial to find out if your current lender has prepayment penalties. If so, the drawbacks of refinancing your vehicle loan may outweigh the advantages of having a lower monthly installment. How to refinance the car loan that has bad credit If you already have a loan and it has declined since you purchased your vehicle, or you absolutely need a lower payment, refinancing could be worthwhile. Similar to shopping for a new or used car, the refinancing process involves lots of research. Check your credit Review your credit score and report to avoid any unpleasant surprises before searching 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 and report the inaccurate data. You can request a copy of your credit report free of charge using . Consider your options consult with your current lender on refinancing possibilities that might be available to you. Look into credit unions and banks that you have a relationship with. And — like Caribou, RefiJet and Ally that are geared towards consumers with less than perfect credit could be a good option. Based on the lender, you may be able to review the rate of your loan without impacting the credit rating. Bankrate Tip

When shopping pay close at the repayment options and approval requirements particularly for the age of your vehicle and mileage.

Request a new loan Prior to submitting the loan application, you must gather all documents that the lender will need to expedite the process of review. They will typically require evidence of your the income, residency and details regarding your current loan. Additionally, you will need to supply the amount of miles, make, model and the vehicle identification number for your vehicle. When you apply, be sure to fill in the correct information on the application forms to avoid any ambiguities that could cause a rejection of your application. The lender will confirm the information you have provided. Finalize the loan Review the loan documents to make sure the terms and conditions work for you. If they do, then sign on the dotted line to complete the transaction. The funds will either be transferred directly to your current lender or to you in order to pay off the initial loan off. Bankrate Tip

Make sure to contact your lender to determine when you can begin making payments. From here, you will follow the new monthly payment schedule until you have paid off your loan. loan.

How to boost your credit prior to refinancing it’s best interest for you to improve your credit score prior refinancing your vehicle loan. The lowest interest rates are usually only available to those with good or excellent credit, and having a better credit score could mean the difference between getting an . Here are some tips to pay all your bills in time. Get current on any past-due debts. Reduce the amount of your credit card balance at 30 percent, or less than the credit limit. Do not close credit accounts that you have closed. Only apply for new credit when you need to. You should also monitor your credit score to keep track of your progress. Certain credit card companies or lenders will offer you free credit reports with your monthly statement. In other cases, you might have to rely on checking them infrequently or paying to check your score. Alternatives to car loan refinancing There are other options in the event that you analyze the data and determine that refinancing your vehicle loan isn’t the best financial move. Sell it. Based on the value of your vehicle is worth and how much is due for the loan and the amount of your loan, you may be able to trade it in for a more affordable option , and even take the remaining balance and roll it into the new loan. Request a modification. Since the majority of lenders don’t change their loans, you would request this in the form of . This lets you adjust the payment terms and sometimes interest rates -without going through a whole new application procedure. Defer payments. This option is only available when you’re in a financial crisis that is short-term, but it is an alternative. It is possible to skip up to three months of installments. But, they’ll be added on to the end of your loan and you will still being charged interest. Adjust your budget. If you are , consider adjusting your budget to make the payments more affordable until you qualify to refinance. Also, you should increase your credit score in the meantime to qualify for an interest rate that is better in the event of applying for a new loan. The bottom line Unless you are experiencing financial hardship and risk having problems if you don’t reduce the amount of payments, refinancing with bad credit may not be an appropriate financial choice. Instead, explore alternatives, for example, adjusting your budget to temporarily get your credit and finances back to normal. It’s also possible to exchange your vehicle to a cheaper car depending on the value it’s worth.

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Allison Martin’s work started over 10 years ago when she was an online content strategist and she’s since been published in a variety of top financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. The article was 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 the confidence to manage their finances with precise, well-researched and well-researched information that breaks down complex topics into manageable bites.

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