An auto loan may be refinanced to reduce interest payments, improve the loan’s conditions, and save money throughout the life of the loan. If, on the other hand, you have poor credit, the process of refinancing may be more difficult for you.
Even though there are no assurances, it is possible for you to refinance your auto loan even if you have poor credit. Some financial institutions concentrate their lending efforts on providing bad-credit borrowers with the opportunity to refinance their vehicle loans in order to improve their credit standing, cut their interest rates, or reduce their monthly payments.
Why Refinance an Auto Loan?
Refinancing a vehicle loan might help you save money by allowing you to move to a more favorable interest rate, or it could modify the terms of your loan so that you can pay it off more quickly or in more manageable installments. Either way, the process could result in financial benefits for you. If you are able to negotiate a lower interest rate on the vehicle loan that you now have, you may be able to free up some cash on a monthly basis that you can use toward other bills. You have the option of continuing to make the same payments on the loan each month, or you might make additional payments toward the main sum each month.
Refinancing your auto loan might end up saving you money over the course of the loan’s duration, or it could free up your cash flow, allowing you to pay down other debts with higher interest rates. When you are looking for a new loan, you should do some comparison shopping to find one that has terms that are more to your liking as well as a cheaper interest rate. These will assist reduce the recurring payments that you have to make.
Auto Refinancing Options if You Have Bad Credit
You have a few different alternatives to choose from when it comes to renegotiating the terms of your vehicle loan if you are really contemplating doing so. First, there is your existing lender; nevertheless, you should constantly keep an eye out for better offers in the market. There are several possibilities accessible online, in addition to credit unions, which, if you are a member, may provide you with some of the best rates that are currently available.
Your Existing Lender
Get in touch with your existing lender and inquire about your alternatives for refinancing. Nevertheless, you shouldn’t simply stop there. Before settling on one refinancing option, it is in your best interest to do some comparison shopping to see if or not a better one can be found. Any new lender that is prepared to cooperate with you to provide you a refinancing deal will do their best to ensure that the process goes off without a hitch by cooperating closely with you.
Best Auto Refinance Lending Options Other Than Your Existing Lender
You may improve your chances of obtaining the best interest rate and conditions for your loan by doing some comparison shopping online. People with poor credit may get vehicle refinancing from a number of internet lenders, including the following:
Auto Credit Express
To begin, you will need to submit a refinancing request to Auto Credit Express by filling out their online form. On this form, you will be required to input your personal information as well as your monthly income and housing costs. After you have provided all of the required information, they will get in touch with you to discuss the conditions of the loan. Auto Credit Express is willing to deal with clients despite their poor credit score since they have a flexible approach.
When it comes to refinancing, Capital One will ask you what your top priority is: reducing your annual percentage rate (APR), saving money, or paying off your loan in a shorter amount of time. After entering the details about your auto loan, they will display the possible savings that are available to you. If you come to an agreement with Capital One, they will handle your previous vehicle loan and help you with the process of transferring it over to their company.
To be eligible for refinancing through Capital One, your vehicle must be less than ten years old, the balance on your existing loan must be between $7,500 and $50,000, you must be current on all of your payments, and the vehicle must still be in production. Other requirements include: your current loan must have between $7,500 and $50,000 left to pay off.
If you have an outstanding amount on your car loan between $4,000 and $55,000, at least 24 months left on your loan to pay it off, and your vehicle is less than 10 years old and has fewer than 120,000 miles, LendingClub may be able to refinance your auto loan.
Following the submission of your loan and vehicle information to MyAutoLoan, you will be given up to four different refinancing alternatives to choose from.
RoadLoans and Chrysler Capital have formed a partnership to oversee the companies’ respective vehicle refinancing lending programs. Simply fill out the form, and we will let you know what opportunities are available to you.
Local Credit Unions And Other Financial Institutions
You have access to fantastic refinancing possibilities if you are a member of a credit union, which is to your advantage. The interest rates and costs offered by credit unions are often cheaper than those offered by banks, and they are more likely to deal with borrowers who have credit ratings that are lower than average. You might also try contacting your local bank to inquire about the services they provide.
Borrowers who are interested in refinancing their vehicle loan should analyze all of the aforementioned choices in order to determine which one provides them with the most favorable terms.
What Happens if You Refinance Your Auto Loan With Bad Credit?
You will only be qualified for a subprime or even a deep subprime car loan rate if your FICO score is between 300 and 579. This means that you have a poor credit history. Subprime borrowers are commonly considered to have credit scores in the range of 550 to 650, however other lenders may have more stringent cutoffs for determining who qualifies as a subprime borrower. If your score is lower than 550, you will be placed in the deep subprime category.
If you have poor credit, it’s possible that refinancing won’t be worth it unless you can obtain a better interest rate or loan term than the one you now have. In such case, the only rates that could be made available to you would be those that are comparable to the one you have now or even more disadvantageous.
How Will My Credit Score Affect My APR?
According to Experian’s State of the Automotive Finance Market, the average interest rate for a used automotive loan is 20.58% for a borrower who falls into the deep subprime category, while the average interest rate for a borrower who falls into the subprime category is 17.11%.
The average annual percentage rate for borrowers with prime credit, which ranges from good to exceptional, is 5.49 percent, while the average rate for borrowers with super-prime credit, which ranges from excellent to perfect, is 3.66 percent. There are a few different contexts in which it is advantageous to have a better credit score. Before making an application for a loan to refinance your mortgage, you should probably concentrate on improving your credit history.
Even if they have a poor credit history, borrowers who are interested in refinancing their current loan have access to a number of different choices to choose from. Think about getting quotes from a number of different lenders to figure out which one would provide you the greatest offer. If you don’t have an immediate need to refinance, you should make it a priority to work on improving your credit score as much as you can before applying for a new loan. You might save hundreds to thousands of dollars by obtaining a loan with even a little lower interest rate or loan duration.