One of the best ways to save money is refinancing your auto loan after improving your credit score from a poor rating to a fair or better rating. Increasing your credit score can take time, but doing so is well worth the effort. In general, you can qualify for better interest rates as your credit score increases. Here is what you need to know about an auto refinance for fair credit.
Know Your Credit Score
Don't waste your time applying for loans if you don't know your credit score. Simply hoping you've been able to increase your credit score from a poor rating, a credit score between 300 and 599, to a fair rating, a credit score between 600 and 659, can result in wasting a significant amount of time applying for auto loans. If your score hasn't increased, you'll be receiving the same result of the higher interest rates associated with a poor credit rating.
Instead of taking a shot in the dark, find out your credit score for free. Many companies and services offer free credit scores on a regular basis, including My LendingTree, which offers a 100 percent free credit score with free updates every month. Even after you've verified that you have increased your credit score, make sure you've met other common auto refinance requirements before you apply to refinance your car loan.
Making On-Time Payments Is Key
Making on-time payments is one of the keys to increasing your credit score. Unfortunately, just raising your credit rating from poor to fair may not be enough to qualify you for the interest rate you desire when refinancing your auto loan. Another key for a successful fair credit auto loan refinance is making at least six to 12 months of on-time payments. If you're able to make a streak of on-time payments, lenders will see that you have your debt payments under control which makes you a better candidate in their eyes.
Lenders may turn down your application if, in their eyes, you don't have a long enough streak of on-time payments. Don't get discouraged if that happens to you. Keep making on-time payments and apply again in a few months and you may be approved. The continued on-time payments should give your credit score a nice boost, too.
Shop for the Best Loan
You can apply to refinance your auto loan once you have improved your credit score to the fair range and have made enough consecutive on-time payments. Make sure you get multiple quotes for your auto refinance loan. Different lenders may offer different loan terms and interest rates, so it pays to shop around and find the best deal for you.
You can visit and apply to refinance your auto loan at local banks and credit unions, but filling out multiple applications to obtain an auto refinance for fair credit as well as traveling between locations can take a significant amount of time. If you'd rather streamline the process, you can get multiple auto refinance quotes by filing out a few questions on LendingTree.
Once you have all of your refinance quotes, compare each loan to find the loan best for you. If you're looking for the loan with the lowest overall cost, simply add up all payments and fees for each loan to get the total cost for each loan. Then, compare the numbers and pick the loan with the lowest overall total, assuming all other terms are equal. Refinancing your auto loan isn't a difficult process and could save you a significant amount of money. Make sure you look into your options to see if refinancing could benefit your bank account.