Bad Credit Auto Loan Refinance

For people having trouble making their car payments due to high interest rates or perhaps the term of the loan, refinancing may be an option to consider. If you have bad credit, this may not be the easiest thing to do. There are some lenders who may offer bad credit auto loan refinance programs, but the majority of lenders are wary to refinance for a client who has poor credit. It is a good idea to have an idea of your credit score and how credit reports work.

There are a variety of things that impact your credit score. One is your level of debt and the current amount you owe to creditors. If you know your credit is bad, you can help improve it by paying on these items. However, the updated information may not show on your report for a few months as scores usually update once monthly. If you can’t wait that long to refinance, you may find a lender who does not check credit, however interest rates are likely to be high because of the potential risk taken on by the lender.

If you want to go to a lender who offers low interest rates and can help lower your monthly payments but you know your credit is poor, you may want to find a credit worthy co-signer. A co-signer is an individual who signs the loan and if you do not pay, they are responsible. Often relatives can be co-signers, but some people are reluctant to take the risk of being stuck with a loan that is not theirs if you don’t pay. With a co-signer, the credit scores of both parties are added and averaged.

In the event that the borrower does not pay, responsibility falls to the co-signer. If they do not pay, the vehicle can be repossessed and sold to pay for the debt. Vehicles depreciate in value over time, so the lender is unlikely to get the full amount needed. This difference may then be billed to the original holder of the loan and/or the co-signer.

So if you do end up using a bad credit auto loan refinance program, make sure you are able to make the payments. By not doing so, you could lose your vehicle. And, if you end up using a co-signer you could damage their credit and leave them with an unwanted expense. It is a good idea to comparison shop for lenders who refinance auto loans before deciding on one. Also check any lender you are considering with the Better Business Bureau to make sure they do not have unresolved complaints.