Tips In Refinancing Your Bad Credit Auto Loan
By Liz Roberts
Being stuck in a car loan with high interest rates and costs can be frustrating. At one point, you may have needed to purchase a car in a hurry but because you have a bad credit history, you may be unable to qualify for loans with a low rate.
Most car loans for bad credit come with 18% to 25% interest rate. Yet because you needed the car at that time, you may have acquired a bad credit card loan despite the high interest rate. Is it possible to improve your current situation?
How can you get off from the high interest rate so you can enjoy a much easier repayment? By refinancing your bad credit auto loan. Refinancing is like getting a second car loan- only with lower rates and easier repayment terms.
Requirements on Refinancing Bad Credit Auto Loan
What are the requirements for refinancing a bad credit car loan? Specific requirements may vary from one lending company to another but the general rules are usually the same.
First, you need to have maintained the car for at least 1 year. Second, your records should prove that you have made consistent and timely payments from the day you started with your repayment. The value of the car you bought should also cost more than the balance of your loan.
If you meet the above criteria, then you’re qualified to apply for bad credit auto loan refinancing. Such a move can slash off at least $100 or even more on your monthly car loan payment. What should you do before refinancing your car loan? Here are some tips:
Get a copy of your personal credit report. Check your credit report so you can see for yourself if your credit score has indeed improved for the past year. If you’ve been timely in submitting your payments and you did not miss a single due, then surely, you have significantly raised your credit score.
Nevertheless, some car loan lenders or car dealers may trick you into believing that your credit score is still too low for you to get better rates. The best way to avoid this confrontation is to present your credit report to your dealer or lender when you apply for refinancing.
Know the value of your vehicle. Most lenders would not refinance your car loan unless your vehicle’s worth meets the minimum value they’ve set. For example, your lender may require that your car be worth at least $7000 in the market. To be sure, do your own research in advance and find out if your car meets your lender’s criteria.
Compare Lenders. Despite the improvement you’ve made on your credit score, you may still be considered as a “sub prime” client or a high-risk customer unless you’ve already reached a FICO score of 700.
Not all bad credit loan lenders offer the same rates and terms so you’ll want to find the company that gives the best deal. Again, you’ll want to take the time researching your options before signing up for a car loan refinancing. Most importantly, make sure that you’re dealing with a legitimate company and that you clearly understand your lender’s terms and conditions.
Liz Roberts is a freelance writer and loan consultant. The website BadCreditResources.com offers resources that specialize in providing bad credit loans and credit cards for people with poor credit financing.
