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Written by Alan Green
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Finding a Bad Credit Auto Refinancing LoanMany people don’t realize how their credit can affect their interest rate until they attempt to buy a car. In most cases, those with bad credit will have a pay a much higher interest rate than someone with good or even fair credit. Often times the buyer is left with the decision to take the higher interest rate or not buy the car. The choice is to take the offer, make the payments on time and then look for a bad credit auto refinancing loan. In some cases, the lender that originally financed the car may consider providing an auto refinancing loan if you have paid your payments on time for a specific period of time.
A borrower must understand the correlation between credit score and interest rate before looking around to refinance an auto loan. When you look at the interest rate you are currently paying, you must compare it to what the lender is offering to those who have good credit. In order to do that you must first know your own credit score and how the lender makes a decision about interest rates. Your credit score is based on several different factors including the following: - Outstanding debt Credit history
- Payment history
- Types of credit being used
- Inquiries for new credit
In addition to scoring factors the credit bureau provides, a lender may use other criteria as well in determining your credit worthiness for an auto refinancing loan. Things such as income, length of employment, length of residence, use of bank accounts, and type of collateral will appear as well. Even if you have bad credit, if you have made payments on time to the lender that is currently financing your auto, you may be able to refinance the loan with a different lender at a more favorable rate.
Another thing lenders may do for those with bad credit is request a higher down payment and a shorter repayment term. Although it is difficult to understand why a shorter payment term would be beneficial, the lender will look at it in terms of how soon he can get his money back. For those who absolutely must have a new car because they have none or it is broken beyond repair, you can accept the original offer as long as you can afford the payments and then look for a bad credit auto refinancing loan from another lender. It is not advisable to do this as soon as you buy the car but to wait until you have made at least six months’ worth of payments in order to show a new lender that you have the ability and desire to make your payments on time. |
