How to Refinance a Car Loan With Bad Credit
Refinancing a car loan can save you money, but it can be hard to do if you have bad credit. The lower your credit score, the less likely you are to find a refinance loan that makes sense financially.
Can you refinance a car loan with bad credit?
It can be difficult to refinance a car loan with bad credit, but it’s not impossible. Still, you could end up with high interest rates and pricey fees on your new loan.
How bad can your scores be to refinance? Although a FICO score below 580 (or a Vantage score below 600) is considered to be “poor credit,” some refinance lenders might approve you with a score as low as 460.
But on the other hand, you could end up paying sky-high rates with a predatory lender. And the higher the rate, the more likely you are to fall behind on your loan payments.
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| Credit score | Average new car APR | Average used car APR |
|---|---|---|
| Super prime (781-850) | 5.38% | 6.80% |
| Prime (661-780) | 6.89% | 9.04% |
| Nonprime (601-660) | 9.62% | 13.72% |
| Subprime (501-600) | 12.85% | 18.97% |
| Deep subprime (300-500) | 15.62% | 21.57% |
Source: Experian’s State of the Automotive Finance Market Q1 2024
How to refinance a car loan with bad credit
Check your credit score
There’s a chance you can improve your credit score before you apply for your auto refinance.
Start by pulling your credit reports (for free) from all three of the nationwide credit bureaus — Equifax, Experian and TransUnion — at AnnualCreditReport.com. Check to see if there are errors, like accounts that don’t belong to you, and dispute them if needed.
Just keep in mind that it usually takes time to improve your credit. Any changes to your credit reports can take 30 days or more to affect your credit score. For a big improvement, you may need to spend a few years making on-time debt payments and keeping your credit card balances low.
Talk to your lender
Your best choice may actually be to work with your current lender. Before applying for refinance, see if your lender can help, maybe through a loan modification or a hardship payment plan.
Refinancing with the same company could streamline the process, and discounts may be available. Plus, it will save you the trouble of having to look for a new loan.
Compare bad credit lenders
Besides your current lender, shop around by collecting car loan quotes from three or more other companies.
Be sure to check for any lender fees, as well as your interest rate, monthly payment, time length of repayment and when your first payment would be due.
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.
Where to find companies to refinance a car loan with bad credit
| Lender | Minimum credit score | Starting APR | Loan terms | Loan amounts | |
|---|---|---|---|---|---|
 | 460 | 6.49% | 36 to 72 months | $7,500-$100,000 | |
 | 560 | 5.20% | 12 to 96 months | Starting at $5,000 | |
 | 580 | 6.79% | Up to 84 months | $250-$500,000 | |
 | 600 | 5.49% | 24 to 72 months | Starting at $5,000 | |
 | 660 | 4.99% | 48 to 96 months | $15,000-$150,000 |
Options are limited when it comes to banks that will refinance a car with bad credit.
Usually, the best place to go for competitive rates on car loans and flexible qualification requirements is a credit union rather than a bank. However, you might find even more options if you expand your search to include online lenders.
When should I refinance my car if I have bad credit?
Credit scores aren’t the only detail that matters when it comes to auto refinancing. Even if your credit is bad, there are a few reasons it could still be the right time to refinance your car.
When it may make sense
- Your credit scores have improved: Even if your FICO or Vantage credit score is low, you might qualify for a better loan if those scores are better than when you originally took out your current loan.
- Your car has equity: If your car is worth more than you owe on your loan, you have a better chance of being approved for refinancing. Use free car pricing websites like NADA and Kelley Blue Book (KBB) to get an idea of your car’s current value.
- You qualify for a lower payment: A refinance can reduce your monthly bill by extending your loan payment over a longer term. Although this might raise your interest charges over the life of the loan, it could be worth doing if it’s the only way you can afford to keep up with your payments.
- You can add a cosigner: Having an auto loan cosigner could help you get a better interest rate. Just make sure your cosigner understands that they’re agreeing to be 100% responsible for any loan payments you miss.
When it may not make sense
- Your credit scores have dropped: If your credit scores have fallen since you took on your car loan, you’re unlikely to get a better deal on a refinance.
- High market rates: When interest rates go up, it gets more expensive to borrow money. If auto refinance rates are higher than when you took out your original loan, you’ll have a hard time finding a good refinance option.
- You’re near the end of your loan: Refinancing is less likely to save you money if you only have a year or two of car payments left. In fact, refinancing could end up adding a whole new set of lender fees and higher interest payments (which take place at the beginning of your loan, due to amortization).
Frequently asked questions
In the short term, your scores may drop because of your new loan applications and the shortened length of your average account history. But in the long run, your credit can improve if you stay current on your loan payments.
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