How To Refinance A Car Loan With Bad Credit

How To Refinance A Car Loan With Bad Credit

Written by June 22, 2022

Most people have had bad credit at one point or another in their lives, and although they can reverse that situation in very little time with some good planning, sometimes that’s just not feasible. Having a car loan adds to the issue by making it even harder to pay on time, and that may facilitate the need to refinance the car loan altogether.

This is a handy option, even for those who don’t have stellar-level credit, and it can make a major impact on people trying to get back into healthy financial territory. You don’t need to struggle with an existing car loan. Instead, read on to learn how refinancing that loan can help you move forward.


The key takeaways from refinancing car loans include lowering your interest rate, reducing loan payments, or renegotiating for better terms. While not every applicant with bad credit will be considered for this option, the truth is that many will be given the stamp of approval, opening up a new alternative for them to pay for their car.


Many people considering refinancing loans wonder what the minimum credit score requirement is, but in reality, there’s no actual fixed rule. Depending on the lender, they may require a particular minimum score, while others may be more flexible. Other factors they will consider are your debt-to-income ratio, annual earnings, etc. All of these play a factor. The general consensus is that lenders prefer a higher credit score than a lower one, just like any other loan.


There is no magic solution for refinancing car loans with bad credit, but if certain criteria are met, you stand a better chance. Higher interest rates are tied directly to bad credit, since lenders consider the applicant a higher risk when it comes to recuperating their investment. However, people with bad credit may be able to point to lower overall interest rates that are now being offered since they initially purchased the vehicle.

In essence, you’re comparing then-and-now interest rates to determine if today’s rate is lower. If so, it may be possible to renegotiate for that particular interest rate, since lenders will be operating off of modern data. The only caveat has to do with interest rates for new vehicles, as opposed to refinancing rates.

And finally, it should be noted that refinancing a car loan tends to involve extending the term of your payments, which means money less paid each month, versus a higher overall total by the time the loan has been paid off. For some, this is an acceptable temporary solution, especially if there are signals that their financial situation could improve over the short term. The upside is that the majority of car loans can be paid off at any time, and the amounts are not fixed. If you take advantage of a refinancing loan now, you may be able to wipe out your remaining amount before the estimated schedule, and save yourself a bundle in the process.


There are things to consider when shopping around for a refinancing loan. Many lenders refuse to refinance their own loans, which means you may need to do some research to find the best lenders with the best rates. Keep in mind that almost all of these lenders will want to do a hard pull on your credit report, and too many of those can negatively impact your credit score.

Therefore, it’s important to get a general idea of what you can expect, and then choose one, or perhaps two lenders to approach. That way you will reduce the impact on your credit score, and prevent any negative dings from accumulating on your report.

Key criteria to look out for when choosing a refinancing lender include the annual percentage rate, applicable upfront or other fees, and specific loan terms. Make sure to look at the fine print before deciding so that you’re not paying more than you actually have to.


If you’re in need of a refinancing loan, we can help. is familiar with the industry’s best lenders, and we may be able to help out if you aren’t sure who to go with. After all, it’s best to trust the experts who know the business, instead of going it solo and potentially paying more in the long run.

For more information on how to refinance your existing car loan, or to purchase a new vehicle for yourself, be sure to reach out to us at today, and we’ll be glad to help!

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