Best Companies to Refinance a Car Loan with Bad Credit 2022
Getting a car refinance loan with a bad credit rating is very similar to getting one with any other credit rating. But with more limited options for lenders and even fewer options for lenders with reasonable rates on car loans for bad credityou may need to do a little more legwork.
1. Check your credit score
The first step to getting a car loan refinance with a bad credit score is to confirm if you actually have a bad credit score. If it’s been a while since you checked yours, it may have changed back and forth. Knowing your credit score can help you get a realistic idea of the rates you’re likely to receive and the options available to you.
You are entitled to a free credit report once a year through one of the three major credit bureaus – Equifax, TransUnion or Experian. However, nowadays many banks, credit unions and credit card companies offer free credit score updates to their customers.
If you want regular access to a more detailed credit history, you can also pay to subscribe to a credit reporting service. This can help you identify areas of concern on your credit report and work to fix them.
2. Find a refinance lender who works with borrowers with bad credit
After getting a good idea of your credit situation, the next step to getting new financing is to find companies that will refinance your car loan with bad credit. Fortunately, you have a few places to look.
Where to find car refinance loans with bad credit
Auto loan refinancing is a popular financial product. This means you can find them from different types of lenders, even if you have bad credit.
Here are the main types of lenders:
- Traditional banks: Physical banks are still a popular source for auto refinance loans. Credit requirements vary from institution to institution, but some banks are willing to work with borrowers with bad credit.
- credit unions: Credit unions are similar to banks, but are member-owned rather than for-profit corporations. As a result, credit unions can offer better rates and provide refinancing options for people with lower credit scores.
- Online lenders: Online-only lending institutions have lower operating costs than traditional banks and, therefore, may be able to offer lower rates. The number of these types of lenders – which are usually backed by big banks – means that some specialize in different types of borrowers, including those with low credit ratings.
- Auto loan brokers: Rather than going directly to a lender, you can work with a broker who will shop around to refinance car loans for you. These companies usually operate online.
- Loan markets: With the marketplace model, borrowers can enter their information and receive offers from service providers directly. This allows people to easily compare multiple refinance offers.
3. Shop around for your best options
Our team recommends that borrowers obtain several financing offers and compare them. When it comes to finding the best companies to refinance an auto loan for borrowers with bad credit, the differences can be significant.
People with bad credit scores can sometimes feel desperate to find financing options. Some lenders take advantage of this fact, offering exorbitant interest rates to these borrowers. But not all lenders act this way. Some offer rates that, while higher than borrowers with good credit, are still reasonable. Comparing a few quotes can help you find the best rate for you and your credit situation.
Will applying for multiple bad credit refinance loans hurt my credit rating?
It is true that any loan application, including a refinance car loan, requires a thorough credit investigation. This will likely cause your credit score to drop. This part is unfortunately unavoidable.
However, credit reporting agencies now weigh multiple credit checks for the same type of loan in a short period of time, like one. This means there is no additional impact on your credit score from getting multiple loan offers from different lenders compared to just one.