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Can I Refinance a Car Loan With Bad Credit?
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Even with poor credit, it’s possible to refinance your car loan for a lower interest rate or better terms. Refinancing an auto loan replaces your existing loan with a new one that will hopefully save you money. If you need to lower your monthly car payment to a more manageable level or want to cut down on interest fees, work with a company that specializes in refinance car loans for bad credit.
Should you refinance your auto loan?
You should refinance if it makes sense for your financial situation. Refinancing an auto loan at a lower annual percentage rate (APR) means you’ll pay less in interest fees over time. However, a lower rate might be difficult if your credit hasn’t improved since you took out your original loan.
If your goal is to get a lower monthly payment regardless of a lower rate, you may need to refinance for a longer term. This can save money in the short run, but the amount of interest you’ll pay throughout the life of the loan will increase and could cancel out the money-saving advantages of refinancing.
Before you decide, answer a few questions:
What is your current credit score?
Your credit score determines your auto refinance rate — in general, the higher the score, the better the rate. If your credit score has increased since you got your original loan, you may qualify for a lower interest rate. If it’s lower than you thought, check your credit report at annualcreditreport.com to make sure there aren’t any errors that could be dragging it down.
Auto lenders use different credit scoring models, but credit bureau Experian breaks down scores this way:
- 781-850: Super prime
- 661-780: Prime
- 601-660: Near prime
- 500-600: Subprime
- 300-499: Deep subprime
Those with a credit score of 660 or higher receive the best new-car auto loan rates, 6.64% or better, on average.
Did you get dealer financing when you purchased the car?
Car dealers often make money when they help set up customers’ auto loans. They are allowed to accept rewards offered by their finance partners. If you didn’t negotiate your rate, you might have paid too much for financing and may be a good candidate for an auto loan refinance. Shopping around for a loan is the best way to ensure that you save money on fees and interest.
When did you last refinance your car?
While there is no limit to the number of times you can refinance, refinancing a car does impact your credit score and could draw out your debt. Refinancing for a longer term puts you at risk of becoming upside down on your car loan, or owing more than the car is worth. That risk grows if you refinance for longer terms multiple times.
Best companies to refinance your car when you have bad credit
These lenders are worth considering if you’ve decided to pursue refinancing your car loan but you’re concerned that your credit rating may disqualify you. We sorted thousands of bad credit auto refinance applications before selecting the top five companies below. Most accept credit scores in the 500s and offer online prequalification.
|Best bad credit auto refinance loans|
|Starting APR||Terms||Amounts||Min. credit score|
|Auto Approve||2.25%||12–120 months||$8,000+||500|
|Autopay||1.99%||24–84 months||$2,500–$100,000||Not specified|
|Capital One||0.00%||0–0 months||$0–$0||Not specified|
The online marketplace had the lowest average APR on closed, subprime auto loans on the LendingTree platform in Q4 2020. It was also the most popular choice.
- Starting APR: 1.99%
- Terms: 24–84 months
- Minimum amount: $7,500
iLendingDIRECT works with credit scores as low as 560 (510 in Florida). A personal consultant will walk you through how to refinance a car, going over your options and all the paperwork. The Colorado-based company also refinances specialty vehicles such as boats, RVs, ATVs and motorcycles for a maximum of 184 months.
|Positive reviews: 4.7 out of 5 stars on Trustpilot||High minimum loan amount: $7,500 is steep, especially for a motorcycle or ATV|
RefiJet has a minimum credit score requirement of 500 and offers competitive rates and flexible loan amounts. But there’s one significant drawback: It charges a $395 application fee. If you have damaged credit, the fee could be worth it if you’re able to find your best bad credit car refinance.
- Starting APR: 2.49%
- Terms: 24–84 months
- Minimum amount: $5,000
The online marketplace offered the second-lowest average APR for subprime borrowers on the LendingTree platform. It also defers payments for the first two months of your refinance loan (interest will still accrue). Some borrowers may be able to refinance for as long as 90 months, though there are risks to such long-term car loans. You could refinance a specialty vehicle through RefiJet, such as a motorcycle, but RefiJet does not refinance commercial auto loans.
|Positive reviews: 4.9 out of 5 stars from LendingTree users||Application fee: RefiJet is one of the few auto refinance companies to charge one|
Auto Approve offers a break on payments for 45 days from the day you sign (90 days for qualified applicants). Remember, interest will continue to accrue during this time.
- Starting APR: 2.25%
- Terms: 12–120 months
- Minimum amount: $8,000
In addition to bad credit car loan refinancing, the online marketplace offers lease buyouts, as well as refinancing for speciality vehicles including RVs, motorcycles, ATVs and boats. Credit score requirements vary by your location, but Auto Approve may accept scores as low as 500.
|Positive reviews: 4.8 out of 5 stars from LendingTree users||Higher starting APR than competitors|
Of the companies on this list, Autopay has the lowest minimum loan amount at $2,500 and one of the lowest average APRs for LendingTree users with poor credit.
- Starting APR: 1.99%
- Terms: 24–84 months
- Minimum amount: $2,500
Besides refinance auto loans, the online marketplace also offers loans to buy a new or used car. To get an idea of the rate and terms you qualify for, you could prequalify online.
|Flexible amounts: You could refinance small or large loans here||No specialty financing: You’ll have to look elsewhere to refinance an RV, ATV or boat|
More than a credit card company, Capital One offers bad credit car refinancing. It may also offer convenience if you’re already a customer, but its starting rate is comparatively high.
- Starting APR: 0.00%
- Terms: 0–0 months
- Minimum amount: $0
To refinance with Capital One, you must be up to date on your current auto loan payments and your mortgage payments, if applicable. Capital One doesn’t refinance its own loans and it doesn’t offer specialty vehicle financing or lease buyouts.
|Brand recognition: It offers a variety of loans, plus banking and credit cards||Narrow loan amounts: Your payoff amount must be between $0 and $0|