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How to Refinance a Car Loan with Bad Credit

Tips to refinance with less than perfect credit.

If your credit score has improved, it might be a good bet to refinance the auto loan with the existing lender. The alternative is to start shopping around for rates and terms. Call up your bank or credit union and see what promotions they have for car refinancing.

Lenders use different score tiers to determine interest rates on many loans. It’s a good habit to shop around before committing to an interest rate. For instance, one lender may see 700 as very good for their best rate while another lender may want to see a 760 or above credit score.

What can you do to prepare? 

Review your credit report

Pull your credit report and review the information to make sure everything is accurate. Fix inaccurate credit information before refinancing. Get your free credit report through

Check your credit score

Your credit report won’t include a credit score. To get free credit scores, download apps like Credit Karma (or choose another free score app in the marketplace) to see where your score falls within the credit score range.

Qualifying for an car loan refinancing with low credit scores can prove to be quite difficult. Plan to increase your credit score.

Strengthen your credit rating

Removing inaccurate information can improve your credit score.

If you’re scores are low due to delinquency or unpaid debts, you’ll need to remedy those situations. Get up-to-date on your payments to push the delinquency further in time.

If you lack credit history, you’ll need to strengthen your scores by adding additional tradelines. You can do by getting a secured credit card or loan or using a credit builder loan.

Self is a great option for those who are seeking to establish or improve their credit. Learn more about Self’s credit builder loans.

Speak to your lender

Lenders will look at your history of car payments. It’s best to be up-to-date. Additionally, it’s important to contact your existing lender the moment you’re feeling the financial crunch. Waiting too long might cause you to miss a payment and impact your approval odds.

Some lenders may be able to modify your loan without refinancing. Others may require you to complete an application. It’s a good habit to apply with multiple lenders to assess the best rates and terms. Start with your existing lender and shop around too.

Shop around for better rates

There are lenders who focus on bad credit and you may find a better rate by refinancing with one of them. However, the best car loan rates you’ll typically receive will be from credit unions compared to many other lenders. And many credit unions may approve car refinancing to those with less than perfect credit too.

Next Steps: Do the math

Make sure you know the amount of time left to pay off your car loan. Sometimes, refinancing a car loan when you have 2 years left doesn’t make the most mathematical sense. In these situations, you’ve already paid all the interest upfront and each payment you make goes directly to the principal.

Finally, the next best step to refinance your car loan is to check your credit, dispute inaccurate information, and find ways to improve your credit scores.

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of and His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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