How to Refinance a Car Loan with Bad Credit

Dealing with a bad credit score can be quite a burden on an individual who is looking for a way to refinance their car, consolidate bills, and qualify for a personal loan. Among all these financial strategies, refinancing a car may be the best solution to saving money every month. Car payments are a necessity, unless the individual has thousands of dollars saved up to purchase a car in cash. Individuals who have bad credit who need to finance a vehicle will end up paying higher interest rates on the car loan than individuals with an excellent credit score.

The good news is that there are ways for people with bad credit to refinance their car loan in order to rebuild their credit and avoid high interest rates. There are a few steps to take that an individual with bad credit should be aware of when refinancing their car loan. First off, the total payoff balance needs to be known in order to apply for refinancing. Refinancing a car loan is the process of obtaining a personal loan or another car loan that will be the amount that is owed on the vehicle. The amount that is owed on the car loan will need to be forwarded to the lender whom the individual is considering to refinance their vehicle with. The next step to take on the behalf of the borrower is to find out the exact value of the vehicle. The Kelly Blue Book is a reliable source that people use to determine the exact value of a new or used vehicle. In order to receive the best possible interest rate when refinancing a vehicle, the borrower should maintain an excellent payment history with their current auto loan. Individuals with late payments on their auto loan will be considered a higher risk, which will impose a higher interest rate on the borrower.

The next step to take is comparing rates between lenders and finding the right lender. Individuals with bad credit are advised to stay away from major lending companies. Major auto lending companies usually require an excellent credit score in order to qualify for a refinanced loan, or a traditional auto loan, for that matter. Being disqualified from a major auto lender can lower a credit score even further, making it more difficult to qualify for refinancing. Instead, the borrower with bad credit should use auto lending companies that specialize in financing those with bad credit.

Once the borrower has found a wide variety of auto lenders that specialize in financing a car loan for those with bad credit, the borrower should then take the time to compare rates between lenders. Finding the best possible interest rate on a car loan will help the borrower save on interest payments, and it will also help them afford the car payment more comfortably. Auto loan lenders who specialize in financing those who have bad credit are considered sub-prime lenders. Major auto loan lenders are considered prime lenders.

The next step the borrower is required to take deals with having the right documents ready when applying refinancing. Bank statements, employment records, financial accounts and other information will be needed to fill out the application. Many auto loan lenders who specialize in refinancing a car loan for those with bad credit can be found online. Filling out an application only takes a few minutes, and it is up to the borrower to determine which lender will be right for them. The process of paying off the current auto loan and transferring the title to the new lien holder will be handled by the new auto lender that is dealing with the refinancing.