How to Refinance a Car With a Bad Credit History
Securing a lower auto loan rate through refinancing can reduce monthly payments. Consumers with a poor credit history often struggle to find reasonable loan interest rates. According to Edmunds, a company that provides consumer auto information, even if you have bad credit, you have options for borrowing. Researching the best rates and approaching the right financial institutions can help.
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Instructions
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Get a copy of your credit report and review it for errors. Small inaccuracies could be pulling your credit score down further (and driving up financing costs). According to the Federal Trade Commission (FTC) all individuals are entitled to a free credit report annually. Visit Annual Credit Report to order a free report from all three bureaus (Equifax, Experian and TransUnion). Review the reports for late payments that aren't accurate and accounts you don't recognize. If you find errors, contact the reporting bureau directly and file a dispute form. These forms are usually processed within 45 business days.
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Shop around for the best auto loan rate. Even if you have credit challenges, you can still shop around. Check out online comparison tools such as Bankrate. These tools allow you to compare auto refinance rates across the country. You can sort the results by credit rating (poor, average, good or excellent) to help you refine the results.
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Contact credit unions. Many credit unions make local decisions. This means a branch manager has lending authority and has more flexibility to approve loans. This gives applicants an opportunity to explain personal circumstances that contributed to their credit, such as serious health issues or job loss. The credit union will also want to know what you've done to settle debt obligations.
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Evaluate financing costs. Financing costs, such as pre-payment penalties and application fees, should be considered when choosing an auto loan. If two companies offer the same refinance rate, comparing their financing costs can help you make a decision.
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Tips & Warnings
Make a list of collection items on your credit report. Contact each lender directly to negotiate a re-payment plan right away. Once you settle these items, the lender will start reporting positive credit history.
If your loan is denied, consider waiting several months to refinance. While waiting, work on improving your credit score. This will help bring up your credit score.
References
- Photo Credit yellow car, a honda japanese sport car model image by alma_sacra from Fotolia.com
