Can I Refinance My Car Loan with Bad Credit?
The question “can I refinance my car loan with bad credit?” is a common one. Whether the market was in poor shape when you bought your car, or your financial situation wasn’t at its best – perhaps your credit was low then as well, or maybe you didn’t have cash for a down payment – if you find yourself faced with an overwhelming car loan, you might be wondering what options you have.
Can I Refinance My Car Loan with Bad Credit?
The answer is that yes, it is possible to refinance your car loan even if your credit is bad… but there are a few important factors to consider, which might interfere with the process, so it is important to really determine if it’s the right move for you or not.
There are two main factors that will determine if you can refinance your loan even with a low credit score, and you should know about them in advance because they’re what most lenders will use when they decide whether to approve or reject your refinancing request.
The first factor is the current economic market – in other words, the general trend of loans at the time in which you’re looking to refinance. If the credit market is slow and lenders are desperate, your odds of getting a new loan even with a low credit score increase greatly. In a fast-moving, healthy market, where plenty of good-credit borrowers are seeking loans, the lenders don’t “need” business and will shy away from a poor-credit borrower, so you may have serious trouble finding a refinancing loan that beats your existing rate – even if that rate is extremely high.
The other factor at stake here is your financial situation. If you’re in dire straits, meaning you’re about to default on your car loan, then you may be able to find a lender willing to refinance you. The lenders don’t want you to default any more than you want to do so, since it costs them money as well. Many lenders will bail you out of a default situation by offering a refinancing package that lowers your monthly payment… but the catch here is that it comes with a penalty.
This type of “emergency” refinancing is most likely not going to save you money in the long run, and will likely come with a much steeper interest rate than the loan you’re leaving behind. Still, if your main concern is immediate action on a near-default, and if you need lower monthly payments now in order to stay current on your loan, then you can likely find a lender willing to give them to you. Your current lender may even be willing to do so in order to keep the loan from defaulting.
As a low-credit borrower, your options for refinancing are somewhat limited, but that doesn’t mean they’re non-existent. If you’re wondering “can I refinance my car loan with bad credit,” you should know that there are ways to go about doing just that – they may come with a price, but it may be worth it for the immediate benefits.