How to Refinance a Car Loan with Bad Credit
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If you’re looking to refinance your car loan but have bad credit, you may be wondering what your options are. Luckily, there are a few things you can do to improve your chances of getting approved. Follow our tips and you’ll be on your way to refinancing your car loan in no time.
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Introduction
If you have bad credit, you may be wondering if you can still refinance your car loan. The good news is that it is possible to refinance a car loan with bad credit, although there may be some challenges involved.
In order to successfully refinance a car loan with bad credit, there are a few things you will need to do. First, you will need to find a lender that is willing to work with you. There are a number of speciality lenders that cater to borrowers with bad credit, so this should not be too difficult.
Once you have found a lender, you will need to shop around for the best rates and terms. Be sure to compare multiple offers before making a decision. It is also important to remember that just because you have bad credit does not mean that you have to accept high interest rates.
If you are able to find a lender who is willing to offer you competitive rates and terms, then you should be able to refinance your car loan without too much difficulty. By taking the time to shop around and compare offers, you can ensure that you get the best deal possible on your loan.
Check Your Credit Score
The first step is to pull your credit report and check your credit score. If you have a good credit score, you may be able to qualify for a traditional auto loan with a lower interest rate. If your credit score is poor, you may still be able to qualify for an auto loan, but the interest rate will be higher.
You can get a free copy of your credit report from each of the three major credit bureaus – Experian, Equifax, and TransUnion – once every 12 months. You can also get your free credit score from many websites and apps.
Get Pre-Approved
The first step is to get pre-approved for a loan. This means that you will need to provide some basic information to the lender, such as your Social Security number, employment history, and income. The lender will then pull your credit report and give you a loan decision. If you are approved, you will be given a loan estimate, which is a document that outlines the terms of the loan.
If you have bad credit, you may not be able to get pre-approved for a loan with the best terms. However, it is still worth applying for a loan so that you can compare offers and find the best deal available to you.
Comparison Shop
The first step to refinancing a car loan with bad credit is to comparison shop. In order to get the best rate possible, it’s important to compare offers from multiple lenders. Be sure to compare APRs, not just interest rates, as the APR will give you a better idea of the true cost of the loan.
Once you’ve found a few lenders who are willing to work with you, it’s time to start negotiating. Remember, the goal is to get the lowest APR possible, so don’t be afraid to ask for a lower rate. Lenders are often willing to negotiate, especially if you have a good relationship with them.
If you can’t get a lower APR from your current lender, it may be time to look elsewhere. There are many online lenders who specialize in loans for people with bad credit. These lenders may be able to offer you a better deal than your current lender.
Refinance with a Credit Union or Bank
If you have bad credit, your options for refinancing a car loan are somewhat limited. Credit unions and banks are the most likely sources of refinancing, but they will be reluctant to approve your application if your credit score is low. Your best bet is to approach a credit union or bank with which you have had a previous relationship.
If you do not have an existing relationship with a credit union or bank, you can try to find one that specializes in bad credit loans. These financial institutions are more likely to be willing to work with you, but you will probably pay a higher interest rate.
Another option is to refinance through the dealership where you purchased your car. The interest rate will likely be higher than what you could get from a bank or credit union, but the process is usually simpler and faster.
Before refinancing, be sure to check your credit report and score so you know where you stand. You can get a free copy of your report once per year from each of the three major credit reporting agencies — Equifax, Experian and TransUnion. You can also check your score for free on several websites, including NerdWallet and Credit Sesame.
Refinance with an Online Lender
Before you start shopping for a refinance loan, check your credit reports and scores to get an idea of where you stand. If your credit has improved since you took out the original loan, you may be able to get a better interest rate. If your credit has worsened, you may still be able to get a refinance loan but it will likely come with a higher interest rate.
If you decide to move forward with refinancing, shop around for the best deal. Start with online lenders, as they tend to have lower interest rates than traditional lenders. Be sure to compare multiple offers so that you can find the best rate and terms for your situation.
When you’re ready to apply, most online lenders will require basic information such as your name, address, Social Security number and income. You’ll also need to provide information about the car you’re looking to refinance, including the make, model, year and mileage. Once you submit your application, the lender will run a hard credit inquiry, which can temporarily lower your credit score by a few points.
If approved, you’ll receive an offer from the lender with the terms of the loan. Be sure to review the offer carefully before accepting it. Once you accept an offer, the lender will send money to pay off your current loan and you’ll start making payments on the new loan according to the terms of your agreement.
