Can I Refinance a Car Loan With Bad Credit?
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Even with bad credit, you may be curious about your options for refinancing your auto loan to find out if you can get a lower interest rate or better terms. If your car payment is too high for your budget and you struggle to make payments on time, refinancing could potentially help you lower those payments to a more manageable level.
When you refinance an auto loan, you are, essentially taking on a new loan to pay off the old one. In some cases, the new loan may have a better interest rate and/or a longer term. Of course, agreeing to a longer loan term could put you in a tough situation when it’s time to trade in or sell your car if you end up owing more money than it’s worth, so keep this in mind as you consider refinancing.
Ideally, when you go to refinance your car loan, you’ll be able to qualify for a lower interest rate by working with a company that helps people with bad credit refinance their auto loans.
- Can you refinance your auto loan with bad credit?
- Should you refinance your auto loan?
- Best companies to refinance your car loan when you have bad credit
- What’s next?
Can you refinance your auto loan with bad credit?
Bad credit, also referred to as subprime credit, means you have enough negative information in your credit files to drop your credit score. VantageScore, which is the scoring model used by LendingTree, has the following credit score ranges:
- 781-850: Super prime
- 661-780: Prime
- 601-660: Near prime
- 500-600: Subprime
- 300-499: Deep subprime
Typically, the lower your credit score, the harder it is to get your auto loan refinanced. Especially for those in the deep subprime range, taking measures to improve your score is a wise move.
We’ve chosen several auto loan companies that specialize in helping those with past credit problems refinance an auto loan. We included the companies here because they accept auto loan refinance applications from people with credit scores of 600 or lower. They also have a good rating with the Better Business Bureau (BBB), a good Trustpilot score or have otherwise proven that they have many happy customers. These companies also do not impose application fees.
Additionally, the companies on this list do not impose prepayment penalties when they refinance an auto loan, and they don’t charge an application fee or origination fees, which add to the total amount of the loan and could cancel out the advantages of getting a lower interest rate. The full methodology for selecting lenders is included at the end of this article.
Should you refinance your auto loan?
Refinancing an auto loan offers some financial advantages to those who qualify for a lower interest rate. Over time, you’ll pay less money toward interest if your rate decreases. However, choosing a longer loan term, which may make your monthly payments smaller, will increase the amount of interest you pay throughout the life of the loan and could cancel out the money-saving advantages of refinancing.
Before you decide to refinance you should consider the following things.
What is your current credit score?
Your current credit score will determine what kind of rate you can get on refinancing. One factor to consider is whether or not your credit score has increased.
Experian defines FICO Score credit levels as follows:
- 800-850 Exceptional
- 799-740 Very good
- 670-739 Good
- 580-669 Fair
- 300-579 Very Poor
If your credit score has increased since you got your original loan, even if it’s still not as high as you may like it to be, you may qualify for a lower interest rate. You may have taken the first offer for financing you received at the dealership, in which case you should explore refinancing right away to see if you can reduce your monthly payment or decrease the total amount of interest you’ll pay.
When did you last refinance your car?
You should also consider when you last refinanced your vehicle. While there is no limit to how many times you can refinance your car or how frequently you do it, it does impact your credit score and it can increase the debt load you carry in the long run.
Did you get dealer financing when you purchased the car?
Car dealerships are incentivized to put buyers into in-house financing. Dealers are allowed to accept loyalty rewards offered by their finance partners and the practice is legal. So, if you didn’t negotiate your interest rate at the dealership when you originally purchased your car, you probably paid too much for financing. That means that refinancing could be for you.
Even if your credit was in bad shape when you purchased your car, if you’ve made your payments on time or you’ve been working on rehabbing your credit files, you could reap the rewards of your hard work in the form of lower interest rates on your car loan.
Many lenders specialize in financing vehicles for people with bad credit, but having a few dings on your credit report doesn’t mean you should skip the research phase of finding the best possible terms for your refinanced auto loan. Shopping around for a great new loan is the best way to insure that you save money on fees and interest.
Best companies to refinance your car loan when you have bad credit
These lenders are worth considering if you’ve decided to pursue refinancing your auto loan but you are concerned that your credit rating may disqualify you.
RoadLoans, the direct lender subsidiary of Santander Consumer USA, offers a quick prequalification process online. Your application is good for 30 days if you qualify, so you can shop around. Your loan application approval or denial will arrive within 24-48 hours of when you apply. They service residents of every state except Alaska, Hawaii, New Hampshire, Mississippi and Nevada.
You can get traditional refinancing through this company, and while you may be able to get up to $5,000 cash back refinancing in some situations, it’s only available in some states. It’s also worth noting that RoadLoans is not legally able to offer refinancing to members of active military, their dependents or spouses under the Military Lending Act.
Your vehicle must be 7 years old or newer and have fewer than 105,000 miles. You must have a remaining loan balance of at least $5,000, which is lower than many other refinance companies. RoadLoans’ maximum loan amount is $75,000. The vehicle must have a clean title and can’t be classified as salvaged.
Specializing in offering refinancing to consumers with bad credit, RoadLoans notes that they consider FICO credit scores of around 600. They don’t disqualify applicants who have been through bankruptcy or who have no credit history. They don’t have any specific minimum credit score requirements, either. They also consider other factors in their lending decisions. Having a cosigner may strengthen your application.
RoadLoans is owned by Santander Consumer, USA. They have an A rating with the BBB. Santander has one star out of five, but only 107 consumer reviews. As of writing this article, RoadLoans has a four out of five stars with Trustpilot and 1,302 reviews. You can read LendingTree’s review of RoadLoans here.
- Bankruptcy and no credit is OK
- A cosigner may help you get approved
- Minimum loan balance of $5,000 is lower than many other auto refinance companies specializing in bad credit
- Possible $5,000 cashback refinancing is unique among bad credit refinance lenders
- Cashback refinancing not available in some states (Alaska, Arkansas, Connecticut, Hawaii, Kansas, Kentucky, Massachusetts, Mississippi, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Pennsylvania, Virginia or Washington, D.C.)
- Refinancing not available in some states (Alaska, Hawaii, New Hampshire, Mississippi, and Nevada)
- Active-duty military and their immediate family members are not eligible for refinancing through RoadLoans
- Current car loans through Chrysler Capital are not eligible for refinancing
- Vehicle must have fewer than 105,000 miles
LendingClub advertises that their customers save just over $3,000 on average when they refinance their auto loan. They offer a quick and easy way to check your rate with a soft pull of your credit, which doesn’t affect your FICO credit score.
They don’t offer financing in every state, and there’s list of restricted vehicles as well. It could take as long as 15 business days to complete the refinance process if you are approved, but responding promptly to Lending Club’s requests will speed things along.
Your interest rate depends on your credit score, your debt-to-income ratio and your credit history. Rates could be as high as 24.99%. If you had a cosigner on your original loan, they’ll need to agree to be on your LendingClub refinance loan as well. This could be a deal breaker for those seeking to release their cosigner.
This lender doesn’t impose origination fees or prepayment penalties. Applying is free as well. They’ll finance a maximum of $55,000, with a minimum loan amount of $5,000. Your loan can be brand-new; they’ll handle refinance deals when the original loan is just a month old. Your current loan must have at least 24 remaining payments, however.
While LendingClub’s Trustpilot score is low at two stars, it’s worth noting that only 24 consumers have submitted their reviews, and there isn’t a review from a consumer who experienced the auto refinance process with LendingClub.
LendingClub has not been rated by the Better Business Bureau, but the BBB website has information about a government action that was settled in September 2018, regarding Lending Club’s violation of the Financial Institutions Reform, Recovery and Enforcement Act of 1969 (FIRREA). LendingClub caused its loan originator, WebBank, to originate more than 200 loans to borrowers that didn’t meet credit requirements by making misrepresentations.
- No origination fees, application fees, or prepayment penalties
- Will refinance up to $55,000
- Will finance loans that are just 1 month old
- Will finance loan amounts as low as $5,000
- Current auto loan must be for a vehicle that’s 10 years old or newer with less than 120,000 miles, which is a more generous limit than some competitors
- If you had a cosigner on your original loan, they’ll need to be a joint applicant on your refinance with LendingClub as well.
- Will not work with salvaged vehicles or commercial vehicles
- Must have at least 24 months of remaining payments on current loan
- APR may be as high as 24.99%
- Loans only available in 35 states (Alabama, Louisiana, Oklahoma, Arizona, Maryland, Oregon, Arkansas, Michigan, Pennsylvania, California, Minnesota, Rhode Island, Delaware, Missouri, South Carolina, Florida, Montana, South Dakota, Georgia, Nebraska, Tennessee, Idaho, New Jersey, Texas, Illinois, New Mexico, Utah, Indiana, New York, Washington, Kansas, North Carolina, Wisconsin, Kentucky and Ohio.)
- Will not finance the following vehicle types: Diesel Volkswagens, Saturn, Suzuki, Saab, Pontiac, Oldsmobile, Nissan Leaf, Mercury, Isuzu, Hummer, Daewoo, Cross Lander or Chevrolet Express G-Series van
OpenRoad Lending has been around since 2009. They are based in Texas, and they only offer auto refinancing. OpenRoad Lending has 1,192 consumer reviews on Trustpilot as of writing this article. Overall, they have four stars out of five. Several reviewers specifically mentioned that the process of getting refinanced with OpenRoad was fast, helped them save money and was a smooth process overall. OpenRoad Lending gets an A+ accreditation from the BBB.
The application process is simple and fast. You’ll get a decision within an hour. To get approved, you must be able to prove a minimum gross monthly income of $1,500, not counting income such as Uber.
OpenRoad Lending will not refinance vehicles with more than 140,000 miles, but they will accept vehicles that are 10 years old or newer, which is more lenient than some other refinance companies. The maximum loan-to-value (LTV) must be 120% of the Kelley Blue Book wholesale value or NADA trade-in value of the car. With good credit, this company will refinance loans with a LTV of up to 175%.
If the vehicle you want to refinance is a Smart Car, you are disqualified from getting an OpenRoad loan. They also won’t refinance vehicles made by Oldsmobile, Daewoo, Hummer, Saab, Suzuki or Isuzu.
If you need GAP insurance to cover you in the event that your vehicle is totaled before you pay it off, OpenRoad Lending can help. They offer other supplementary services, too. Keep in mind that these add-ons will increase the total amount of your loan.
- Positive reviews on Trustpilot mention refinancing and OpenRoad has four out of five stars
- Offers GAP insurance with refinanced vehicles, among other supplementary services
- May refinance your vehicle if it’s eight years old; you may be eligible to refinance a 2011 car
- Quick online application with a decision within an hour
- Will not refinance Smart Cars or vehicles made by Oldsmobile, Daewoo, Hummer, Saab, Suzuki or Isuzu
- Low mileage limit of 100,000 miles
Capital One offers a prequalification process that won’t hurt your credit score. They’ll show your APR, term and estimated monthly payments within 24 hours of receiving your application.
If you are approved, you can initiate a credit application, which will result in a hard pull of your credit. There are no application fees, origination fees or prepayment fees with Capital One. You may have to pay a title transfer fee, set by your state, but Capital One will pay the fee to your state on your behalf and add the cost to the total loan amount.
You can e-sign the contract and enter information about your current lender online.
Your vehicle must be a 2012 model year or newer, and the minimum payoff amount of your current loan must be at least $7,500. The maximum amount that Capital One Auto Finance will refinance is $50,000.
Those with current loans through Capital One Auto Finance are not eligible for refinance through Capital One. They also require that your current loan be reported to one of the major credit bureaus. It must be with a lender that’s BBB accredited and either a state-registered auto dealer or state-registered lender.
Capital One will not refinance commercial vehicles, lease buyouts or automobiles with a salvage title. They will also not approve refinancing for Daewoo, Isuzu, Saab, Suzuki or Oldsmobile vehicles.
Capital One doesn’t have an official minimum credit score requirement for refinancing vehicles. They take your entire financial picture into consideration, including your credit score, payment history, income and debt-to-income ratio. If you have a mortgage, you must be up to date on payments. You must also be current on your auto loan payments.
Capital One has an A+ rating with the Better Business Bureau (BBB). They have an average of just one star out of five from 265 customer reviews left on the BBB website, however.
Only 88 customers left reviews for Capital One on TrustPilot, with an average of two stars. Those reviews are mostly about Capital One credit cards, however.
- BBB rating A+
- Bankruptcy or repossession doesn’t automatically disqualify applicants
- No application fee, origination fee or prepayment penalty
- No minimum credit score to qualify
- Easy prequalification shows you monthly payment, APR and term if you qualify
- Can complete the entire process online
- Negative customer reviews on BBB website
- Must be current on mortgage payments (if applicable) and car loan payments
- Vehicle must be 2012 or newer
- No financing for Daewoo, Isuzu, Saab, Suzuki or Oldsmobile
Auto Credit Express
This company is part of a large network of car financing companies in the United States and Canada. It’s been around since 1999, so they have deep roots in the world of auto financing with more than 1,000 network dealerships.
Auto Credit Express specializes in helping people get financing for a car purchase at their network of participating dealerships, but also offers refinancing for auto loans. They work with those with bad credit, no credit and bankruptcy discharges that are more than two years old.
To get approved, you need a minimum FICO credit score of 600 and you must be current on your auto loan. Repossessions on your credit report will disqualify you from getting refinanced through Auto Credit Express.
You can fill out an application online in about 3 minutes. There isn’t an application fee, but the system will automatically direct you to a portal that asks for a $1 fee to connect you to a credit specialist that will help you review your credit file. Saying no to this option does not affect the likelihood of getting your loan refinanced through Auto Credit Express.
If your application is approved, Auto Credit Express will match you to a local dealership, where you’ll speak with a refinancing expert in the Finance and Insurance (F&I) department. The dealership will be a member of the Auto Credit Express network and can help you finalize the details of your auto loan refinance if you choose to proceed.
While the F&I representative may want to focus on your monthly payment, be sure to pay close attention to the interest rate, APR and length of the loan. Extending your loan term reduces the monthly payment, but increases the amount of money you’ll pay toward interest.
Auto Credit Express has 1,449 consumer reviews on Trustpilot as of the publication of this article. Seventy-nine percent of the Auto Credit Express customers who wrote a review of the company gave it five stars. Several reviewers mention getting car loans with credit scores of less than 550, but the company requires a minimum credit score of 600 for refinancing. The company has an A+ accreditation with the BBB as well.
- BBB Rating: A+
- Good reputation with 79% 5-star reviews on Trustpilot
- Bankruptcies are OK if they were discharged more than 2 years ago
- No origination or application fees
- No prepayment penalties on refinanced loans with Auto Credit Express
- Must be current on auto loan payments to be considered for refinance
- Your car must be worth at least as much as the outstanding debt on the current loan
- Credit score of 600 or better is required for refinancing
- Auto Credit Express will not refinance anyone with a repossession on their credit history
- Vehicle must be 2012 or newer
- Must visit the F&I office of a local dealership, as instructed by Auto Credit Express, to complete refinancing process
To get started refinancing your auto loan, check your credit files with all three major credit reporting bureaus by accessing your free copies at www.annualcreditreport.com. You are entitled to one free credit report every 12 months from each credit reporting bureau.
You can check your credit score for free through Capital One or Discover. You don’t have to have a credit card through these companies to participate in this service. Other major credit card companies may offer the same service. Some banks and credit unions also offer free credit scores, so check with yours before paying for the service.
Look carefully at the terms of your current auto loan. Use a refinance calculator to compare your current loan to potential refinance deals so you can see exactly how much money you’ll save over the life of the loan.
Regardless of whether you qualify for a refinance, it’s important to continue improving your credit standing by making every payment on time. Taking steps to improve your credit will help you get lower interest rates in the future.
You can apply for auto refinancing with these companies, even if your credit score is below 600. We tried to highlight companies with no fees and searched carefully for companies that don’t impose a prepayment penalty.
Although Capital One Finance is the only company that highlighted the title transfer fee, it’s a fee imposed by your state of residence, so it applies no matter which company you use for financing. Be sure to ask the company you decide to work with how they handle the title transfer fee.
All companies on this list have a Better Business Bureau (BBB) rating of at least an A. BBB rates businesses from A+, which is the highest rating, to F, which is the lowest rating. They use information from the public, public data sources and businesses.
We also used Trustpilot reviews and ratings when available. Trustpilot has gathered over 65 million reviews from customers and is among the top 1% of most popular websites, according to Alexa rankings.
None of the auto finance companies here have separate reviews specifically for refinance customers. Reviews for customers purchasing new or used vehicles and using these finance companies and reviews for customers refinancing their cars with the help of these companies are combined. So when evaluating customer reviews, remember that they may be talking about their experience buying a car and getting financing for that purchase, or they may be referencing their experience refinancing a current loan.
The rates and fees mentioned in this article are accurate as of the date of publishing.