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Can I refinance my car loan with 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 mission is to help you make better financial choices by offering you interactive tools and financial calculators, publishing original and objective content, by enabling users to conduct studies and compare information for free – so that you can make informed financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site are from companies that compensate us. This compensation can affect the way and where products appear on the site, such as the sequence in which they appear within the listing categories in the event that they are not permitted by law for our mortgage, home equity and other home lending products. This compensation, however, does affect the information we provide, or the reviews you see on this site. We do not include the vast array of companies or financial offerings that might be open to you. PeopleImages/Getty Images

4 min read Read Published January 13, 2023

Written by Allison Martin Written by Allison Martin’s work began over 10 years ago as a digital media strategist. She’s been featured in a variety of top financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances through providing concise, well-researched and reliable information that breaks down complicated topics into manageable bites. The Bankrate guarantee

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There are money-related questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to give our customers the right advice and tools needed to make it through life’s financial journey. Bankrate follows a strict policy, which means you can be confident that our information is trustworthy and precise. Our award-winning editors and journalists create honest and accurate content to help you make the right financial decisions. Our content produced by our editorial team is objective, factual, and not influenced from our advertising. We’re honest about the ways we’re capable of bringing high-quality content, competitive rates and helpful tools to you by explaining how we make money. is an independent, advertising-supported publisher and comparison service. We are compensated for placement of sponsored products and, services, or when you click on specific links on our website. So, this compensation can influence the manner, place and in what order items appear within listing categories in the event that they are not permitted by law. We also offer mortgage home equity, mortgage and other products for home loans. Other factors, like our own website rules and whether a product is offered in the area you reside in or is within your own personal credit score can also impact the way and place products are listed on this website. Although we try to offer a wide range offers, Bankrate does not include specific information on every financial or credit product or service. Do your vehicle loan payment putting your budget thin? You might have thought about refinancing to lower your payment or maybe get a better interest rate. However, if your credit score isn’t great the refinancing may not be possible or cost you money. Instead, consider alternatives first. Can I refinance my car loan even if I have bad credit?

Although you are able to refinance a car loan with bad credit it can put you in a financial precarious spot so it is wise to first consider alternatives like requesting loan modification or trade in your vehicle.

There are many reasons to not refinance a car loan that has bad credit Lenders start a new loan term when you . In reality, you may get a more affordable monthly installment. But there’s a catch that if the credit scores have improved after taking the initial loan but you’re not likely to receive a lower interest rate. In addition, you may have to pay more for the duration of the loan because the lender will have longer to get the interest. If you want to reduce the amount of your monthly payments you can do it. Otherwise, stretching out your loan duration without getting the lowest interest rate could mean paying far more than your vehicle is worth. It’s equally crucial to find out whether your current lender charges prepayment penalties. If they do, the negatives of refinancing your car loan could outweigh the benefits of a reduced monthly payment. How to refinance the car loan for those with bad credit If you already have a and have decreased the amount you pay for your vehicle or you need to lower your monthly payments Refinancing might be a good idea. Similar to shopping for new or used cars the process of refinancing involves a lot of research. Make sure you review your credit report and score to avoid any unpleasant surprises prior to shopping for the next loan. If you notice any inaccurate or outdated information, file disputes promptly at the three credit bureaus- Experian, TransUnion or Equifax and report the inaccurate data. You can request a copy of your credit report at no cost by contacting . Explore your options You can check with your existing lender about refinancing options offered to you. Look into credit unions and banks you are currently doing business with. And — like Caribou, RefiJet and Ally that are geared towards those with less-than-perfect credit might also be an option. Depending on the lender you can be able to review your rate without affecting the score of your credit. Bankrate Tip

When shopping , pay focus on repayment options and approval requirements particularly for the age of your vehicle and mileage.

Apply for a new loan Prior to submitting an loan application, you must gather all documents that the lender needs to speed up the review process. Most will request proof of the income, residency and details about the current loan. You will also need to supply the amount of miles as well as the make, model, and vehicle identification number for your vehicle. If you are applying, be sure to be sure to fill in the correct information on the application forms to avoid any ambiguities that could cause a rejection to your request. The lender will confirm the information you have provided. Finalize the loan Check your loan documents to ensure that the conditions and terms are acceptable to you. If they do, then sign on the dotted line to finalize the transaction. The money will be sent direct to your existing lender or to you to allow you to pay off the initial loan off. Bankrate Tip

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

How can you improve your credit score before refinancing It is in the best interests of you to increase your credit score prior to refinancing your vehicle loan. The lowest interest rates are typically offered to borrowers with excellent or excellent creditscores. a higher credit score could be the difference between obtaining an . Here are some practical ways to : Pay all your bills promptly. Make sure you are current on all past due debts. Reduce the amount of your credit card balance to 30 percent or less of your credit limit. Do not close credit accounts that you have closed. Only apply for credit as required. It is also important to monitor your credit score to monitor your progress. Certain credit cards or lenders will offer you free credit checks with your monthly statements. In other cases, you might have to rely on checking frequently or making payments to check your score. Alternatives to refinancing your car loan refinancing There’s a variety of options available when you look at the numbers and decide refinancing your vehicle loan isn’t a wise decision for your financial situation. You can trade it in. Depending on what the car is worth and the amount that is due on the current loan, you could trade it in for a cheaper option and possibly transfer the balance to a new loan. Request modification. Since most lenders don’t modify their loans, you would request this in the form of . This allows you to adjust payment terms — and even interest rateswithout going through a whole new application procedure. It is possible to defer payments. This is only available if you’re in a financial crisis that is short-term However, it’s an option. You can skip up to three months of payment. However, they’ll be tacked on to the end the loan and you will still incur interest. Adjust your budget. If you are , consider changing your budget to make the payments less expensive until you are eligible to refinance. Also, you should improve your credit score the meantime to get an interest rate that is better in the event of applying for an additional loan. If you are experiencing financial hardship and are at risk of having to pay a penalty problems if you don’t reduce the amount of payments, refinancing using bad credit may not be an appropriate financial choice. Instead, look into alternatives, such as adjusting your spending plan to temporarily are able to get your finances and credit back on track. It’s also possible to exchange your vehicle for a more affordable ride depending on the amount it’s worth.


Allison Martin’s work began more than 10 years ago as a digital content strategist, and she’s since been published in several leading financial outlets which include The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain confidence to manage their finances by providing concise, well-studied details that cut otherwise complicated topics into digestible pieces.

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