Can You Refinance Your Car Loan with Bad Credit?
If you’re currently struggling to make your car loan payments each month or if you want to take advantage of lower interest rates, refinancing can help you save money on your car loan. Refinancing your loan essentially replaces your existing car loan with a new one that can help you save money with a lower interest rate and lower monthly payment. If you didn’t shop around for the best rates when you originally took out the loan, you may have gotten stuck with a high-interest loan that can result in thousands of dollars in interest over the life of the loan. Thankfully, refinancing your auto loan can help you save. Even if you had or have bad credit, you may still be able to refinance your auto loan. If you think refinancing your car loan might be right for you, here are some steps to help ensure you get the best deal.
Review Your Current Loan
Before you seek out a refinance, it’s important to make sure you understand your current loan and have checked for any pre-payment penalties in the loan terms. If there is a fee, then you’ll need to factor that cost into your refinancing decision. Once you have a clear understanding of your current loan, it can be beneficial to contact your current lender to see if they would be willing to offer you better loan terms. It never hurts to ask! And even if they are willing to update your loan, you should still shop around for other refinance offers to ensure you are getting the best deal possible.
Check Your Credit Report and Credit Score
It’s important to check your credit and be clear on your current standings before applying for an auto loan refinance. You can check your credit by requesting a copy of your full credit report, which shows any credit accounts in your name including loans and credit cards. You are entitled to one free credit report each year from AnnualCreditReport.com. Review your report carefully and check for inaccurate information. If you notice any errors, contact the credit bureaus to file a dispute and have the inaccuracies removed or corrected. You can check your credit score through any of the apps or online monitoring services available, or eligible members are able to view their FICO® Score for free within Digital Banking. Remember, checking your credit score doesn’t lower it. Knowledge is power, so it’s important to know where you stand. Having good credit will help you qualify for a better rate on your refinance. If you had bad credit when you originally applied for the loan but your credit has since improved, your chances are much better for being able to refinance and get a lower interest rate.
Increase Your Credit Score
If your credit still isn’t where it needs to be, you can work to improve your credit before applying to refinance your auto loan. There are several steps you can take to improve your credit score, like paying down your existing debt and paying your bills on time. One of the biggest factors used in calculating your credit score is your payment history, which is why it’s always best to make your payments on time each month. If you tend to struggle with submitting your payments on time, consider setting up payment reminders or automatic payments to help you make sure you never miss another payment due date. Set up Bill Pay in Digital Banking to help you pay all of your bills with ease. Another of the big factors affecting your credit score is your credit utilization, or the amount of debt you currently have from existing loans and credit cards. If you have low balances on your cards and loans, try to pay them off entirely so you can reduce the number of active credit accounts you have open. If you have high balances, focus on paying them down as much as you can. Wiping out any amount of debt you can will help you increase your credit score.
Shop Around for the Best Loan For You
When comparing auto loan refinance options, it’s important to compare the full picture of the loan, including interest rates and loan terms, as well as factoring in any associated fees that would add to the total cost of your loan. Try to find the loan with the best terms, lowest interest rate, and low to no fees to ensure you get the best deal possible. Use our free Auto Loan Calculators to help you determine which deal is the best for you.
Refinance and save with Robins Financial to drive home your savings. Check out our auto loan calculators to help you estimate your monthly car payments. To find out how much you could save, give us a call or make an appointment at one of our convenient branch locations. If you’re ready to refinance, you can apply online now.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.