Auto LoansBest Auto Loan Refinance Rates
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How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

Can I Refinance a Car Loan With Bad Credit?

Updated on:
Content was accurate at the time of publication.

Whether you can refinance a car loan with bad credit boils down to the credit score in question. It may be possible, especially if you target refinance companies that specialize in subprime lending. If you’re a good candidate, refinancing could save you money and land you a loan with more favorable terms.

Learn about refinancing a car loan with bad credit to see if this option is right for you.

If your FICO Score is between 300 and 579, you are considered to have bad credit.

Some car refinance companies are willing to work with borrowers with poor credit, but be prepared to pay a higher-than-average annual percentage rate (APR). You may also need to spend a little more time shopping around compared to someone with excellent credit, since it may be harder to find a lender willing to approve your application.

However, your credit score is only one piece of the puzzle. Deciding if refinancing is worth it will depend on current and projected interest rates. Generally, you’ll only want to refinance if you can get a lower interest rate than what you have on your current auto loan.

In the table below, you’ll find the average interest rates for used cars during the second quarter of 2023. Note that some lenders charge different rates for refinancing than they do on used car loans. Still, used car rates and refinance rates tend to be similar, so this data could give you an idea of what to expect.
 
Learn more about how to improve your credit score.

Credit scoreAverage interest rate for used car
Deep subprime (300 - 500 credit score)21.55%
Subprime (501 - 600 credit score)18.89%
Near prime (601 - 660 credit score)14.12%
Prime (661 - 780 credit score)9.73%
Super prime (781 - 850 credit score)7.66%

Source: Experian’s State of the Automotive Finance Market Q4 2023

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Probably not. There are a few instances when you might not be able to refinance a car loan, and being behind on payments is one of them. Rather than comparing lenders to find the best refinance rate, focus on bringing your original loan back into good standing.

If you’re looking for a lower interest rate, knowing when to refinance a car is essential. There’s no one-size-fits-all approach to this financial decision, but bad-credit borrowers do have unique considerations to keep in mind.

Use our auto refinance calculator to compare your monthly payments, months to payoff and total interest paid to see if you can save with refinancing.

When refinancing a car with bad credit could make sense

 If your credit score has improved. Lenders give the lowest interest rates to borrowers with the highest credit scores. If you’ve improved your credit score since you bought your vehicle, you might qualify for a refinance loan at a better interest rate.

 If interest rates have dropped. Average car loan interest rates have been steadily climbing, but it’s worth keeping an eye on the market. If interest rates normalize and drop, that could be the perfect time to refinance.

 If your monthly loan payment is too high. Refinancing your car loan is the act of replacing your current loan with a new one, hopefully with better terms. If your new loan has a longer term than your original loan, your monthly bill will likely go down. This is because your total loan balance is stretched over a longer period. (However, keep in mind that you will pay more interest over the life of your loan with a longer term.

 If you got your original loan through the dealer. There’s more than one type of auto loan, and not all are created equal. Getting a dealership loan (also called a captive loan) may be convenient, but it also means that you can’t compare lenders and secure the best rate. There may be a lender out there willing to offer you a lower interest rate, but you’ll need to shop to know for sure.

When refinancing a car with bad credit may not make sense

 If your credit score has declined. If your credit score has gone down since you took out your auto loan, you probably won’t find a lower interest rate than what you’re currently paying.

 If interest rates are higher. Interest rates constantly fluctuate with the market. If interest rates are high, it may be a good idea to wait to refinance until they drop.

 If you owe more on the car than what it’s worth. Your loan-to-value ratio (LTV) measures how much your vehicle is worth compared to how much you owe on your loan. If you owe more than what it’s worth, then you have an upside-down car loan. Most lenders won’t refinance upside-down car loans.

There are several steps involved with refinancing a car loan, and the process should start before you reach out to potential new lenders. Here’s what you might do to get the best deal:

Check your credit

Review your credit to see if it’s improved. You should also be sure to dispute any errors that hurt your scores, like inaccurate records showing missed payments or accounts that don’t belong to you. You can pull your credit reports from all three credit bureaus — for free and without any negative impact to your credit scores — from AnnualCreditReport.com.

Contact your current lender

You can streamline the refinancing process by working with a lender who already has your information on file. Plus, you may even get a better deal for having a preexisting account with your lender. Just make sure your lender offers refinancing for its own loans.

Shop for the best rate

Even if your current lender offers a good rate, you should still shop around. To get the best deal, see the rates, fees and loan terms that are available from other car refinance companies.

Select a lender and apply

Once you’ve chosen the best lender for your refinance loan, you’ll need to provide a handful of documents for your application. Each lender has unique requirements, but you should be prepared to verify your income and employment information, present your driver’s license, SSN and your current loan documents and provide the vehicle identification number (VIN) and registration number for your current vehicle.

How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
LenderBest for…Starting APRMinimum credit scoreLoan termsLoan amounts
Consumers Credit Union logoSmall refinance loans6.54% with autopay55036 to 84 months$250 - $250,000View Personalized Offers
Gravity Lending logoJoint refinance loans5.99%66048 to 96 months$15,000 - $150,000View Personalized Offers
iLending logoExcellent customer service5.20%56024 to 84 monthsStarting at $7,500View Personalized Offers
MyAutoLoan logoFast funding4.99%60024 to 72 months$5,000 - $100,000View Personalized Offers
OpenRoad Lending logoLowest credit score requirement7.90%46036 to 72 months$7,500 - $100,000View Personalized Offers

consumers credit union logo

 

Consumers Credit Union: Best for small refinance loans

Starting APR6.54% with autopay
Loan amounts$250 - $250,000
Loan terms36 to 84 months
Minimum credit score550
ProsCons

 Low minimum loan amount

 Extended repayment terms

 May be able to skip a payment two times a year

 Credit union membership required

 Charges fees for inactive accounts

View Personalized Offers

Gravity Lending Logo

Gravity Lending: Best for joint refinance loans

Starting APR5.99%
Loan amounts$15,000 - $150,000
Loan terms48 to 96 months
Minimum credit score660
ProsCons

 Can add a co-borrower 

 No fees to refinance

 Long maximum repayment term

 Unclear eligibility requirements

 Higher credit score required

 Shortest repayment term is 48 months

View Personalized Offers

iLending: Best for excellent customer service

Starting APR5.20%
Loan amountsStarting at $7,500
Loan terms24 to 84 months
Minimum credit score525
ProsCons

 Consistently earns high review scores from LendingTree users

 Personalized service

 Live chat

 Can take as long as a week for an approval decision

 Does not display loan details online

View Personalized Offers

myAutoLoan Logo

myAutoLoan: Best for fast funding

Starting APR4.99%
Loan amounts$5,000 - $100,000
Loan terms24 to 72 months
Minimum credit score600
ProsCons

 Transparent eligibility requirements

 Quick funding timeline

 Need fair credit to qualify

 No customer service phone number

View Personalized Offers

OpenRoad Lending

 
 

OpenRoad Lending: Best for lowest credit score requirement

Starting APR7.90%
Loan amounts$7,500 - $100,000
Loan terms36 to 72 months
Minimum credit score460
ProsCons

 Low minimum credit score

 Transparent eligibility requirements

 Competitive APRs

 Must opt-in for sales calls when applying

 Customer service unavailable on weekends

 Must return loan documents via fax rather than electronically

View Personalized Offers

We reviewed more than 16 lenders that offer auto refinance loans to determine the overall best five lenders. To make our list, lenders must offer competitive annual percentage rates (APRs).

From there, we prioritize lenders based on the following factors:

  • Accessibility: We chose lenders with auto loans that are available to more people and require fewer conditions. This may include lower credit requirements, wider geographic availability, faster funding and easier and more transparent prequalification, preapproval and application processes.
  • Rates and terms: We prioritize lenders with more competitive starting fixed rates, fewer fees and greater options for repayment terms, loan amounts and APR discounts.
  • Repayment experience: For starters, we consider each lender’s reputation and business practices. We also favor lenders that report to all major credit bureaus, offer reliable customer service and provide any unique perks to customers, like free wealth coaching.

LendingTree reviews and fact-checks our top lender picks on a monthly basis. Not all lenders we reviewed can be found on LendingTree’s loan marketplace.

Credit score requirements are unique for each lender, but some work with scores as low as 460. To get the best auto loan refinance deal, you’ll likely need a better credit score than you had when you took out your current loan.

Even with bad credit, refinancing can be an option. Taking on a new loan could help you reduce your monthly payments or bring down your interest rates. Just be sure you know what your goals are, and prequalify with more than one lender so you can compare offers.

Refinancing can impact your credit scores in a couple of ways. In the short term, you may lose a few points with each loan application. Your scores can also drop when you close an old loan account and when you take on new debt. But in the long term, making on-time payments and paying down your debt balances has a stronger, more positive effect that can improve your overall credit health.

No. There’s no set limit to the number of times you can refinance your auto loan, but refinancing multiple times can have negative consequences. For example, opening and closing loans can decrease your credit score. Plus, the more you extend your repayment period, the more you’ll pay in interest and fees, and the greater your risk of going upside down on your car loan.

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