Most people only know of refinancing mortgages, not realizing that you can do the same with a car. Essentially, it means that you trade one loan in for another one, one that is likely to have better terms. These better terms could be interest rates, monthly payments, or duration of your loan, for instance.
When you refinance your auto loan and you come to the end of it, you will be left with a balance, which may be larger or smaller than the one you started with. There may be some equity in your car, for instance, which means you got a bigger loan than your balance when you refinanced, giving you some access to cash.
It is equally possible that you wanted your monthly payments to be reduced. You can do this by actually paying some of the loan off, or you could reduce your interest rates. Either way, it provides many different benefits.
Getting your loan refinanced is quite easy. You can usually go to your existing lender, although you may want to speak to different lenders to find a better deal out there. This is particularly true if you have bad credit, in which case it is important to find a loan that truly suits your needs. The following five tips will be of benefit in that case.
Tips for Bad Credit Car Refinancing
1. Most lenders won’t consider you if you have bad credit. Unfortunately, having a poor FICO score means you won’t get any good rates or deals. Hence, even if you do get approved, it is unlikely to leave you better off.
2. You can use bad credit to your advantage, if you know what you are doing. Essentially, there are companies out there who focus specifically on people just like you. You are their target demographic. And as much as they would like you to think they are doing you a favor by providing you a loan, the truth is actually that you are keeping them in business. Know that, and you can strike a good deal.
3. Find a lender who works with bad credit people just like you. They are ready to come up with deals that are good for your personal situation, They want to look beyond your credit score and come up with something that works for both you and them.
4. Get ready to answer some questions. Just because bad credit financers want to work with people like you, it doesn’t mean that they will just accept anybody. They will try to mitigate their risks as much as possible. Hence, they are likely to ask you why you have certain bad marks, what you have done to stop further ones from happening, and so on.
Get ready to answer personal questions as well. Unfortunately, lending is becoming increasingly difficult and even bad credit car refinancers will want to know that they won’t lose out on their money. They will ask you some very personal questions, such as where you spend your money on, for instance.