Nobody wants a bad credit auto loan with unreasonable rates. But in reality, many consumers find themselves stuck with high rates because of their credit history. But even with bad credit, you should not settle for unreasonable terms.
Bad credit auto loans usually have higher interest rates than car loans that require good credit. The interest rate often ranges from 18% to 25% higher than regular loans. This is why it is recommended to work on improving your credit first before acquiring a loan.
But what if you needed the car in a hurry? What if you already acquired a bad credit auto loan? Is it possible for you to get good rates? The answer is yes. By refinancing your current loan, you can get lower interest rates and easier repayment terms.
Requirements on refinancing bad credit auto loan
Who are qualified to refinance? Auto loan lenders usually require that the loan be at least 1 year old to qualify. The borrower must also present an impressive record of repayment. This means, you should have made regular payments and submitted your payments on time. Also, the remaining balance in the loan should be worth less than the value of the car.
If you decide to refinance your auto loan, here are some practical tips to consider:
Get a copy of your personal credit report.
If you have been consistent with your car loan payments, you should have improved your credit score as well. Order a copy of your report to see how much progress you’ve made with your credit rating. So when you refinance your loan, you can better negotiate with lenders if you know the exact status of your credit history.
Know the value of your vehicle.
Lending companies usually set a minimum requirement when it comes to the car’s value. Make sure that you meet the criteria of the lending company you’re considering to avoid getting rejected.
Although you may have improved your credit rating, you may still be considered as a “sub prime” customer or a high-risk borrower until your FICO score reached 700. Be very careful in choosing lenders. Take time in researching and comparing your choices. Most importantly, make sure that you understand the terms and conditions of the car loan before signing up for refinancing.