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How To Refinance a Car loan with Bad Credit

  • Auto Refinance
  • Xavier Sabastian
  • 8 minutes

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Worried that your lousy credit score could dent your chances at auto loan refinancing? Don’t worry, it’s not all bad news  – a bad credit score doesn’t always mean you need to continue with a bad car loan. 

Auto loan refinancing is the process of replacing your old loan with a new one that has better terms and conditions. Besides a lower APR and monthly payments, it will save you money in the long run. However, most people will tell you to refinance only if you have a good or excellent credit score.

What if you’ve been down on your luck and have a bad credit score? It doesn’t mean you can’t refinance your car. Though there aren’t any guarantees when refinancing with bad credit, you can still score a great deal with a bit of research and preparation.

We’ve broken down everything about bad credit auto refinancing in this post.

Can you refinance a car loan with bad credit?

What does ‘bad credit’ mean when refinancing your car?

Different auto refinance lenders use different credit scoring methodologies. However, there is a broad consensus on what is considered a ‘good’ score and what is considered bad.

The different categories of credit scores are as follows:

  • 781-850: Superprime
  • 661-780: Prime
  • 601-660: Near prime
  • 500-600: Subprime
  • 300-499: Deep subprime

According to the numbers crunched by the Way.com research team, we’ve found that applicants with Near Prime or lower credit scores (<660) are considered to be ‘bad credit’ borrowers.

Should you refinance your car loan?

The decision to refinance your car should be done only after you thoroughly examine your own finances. Depending on your financial circumstances and credit score, you can either refinance immediately or wait until you fulfil certain criteria. Before refinancing, ask yourself these questions: 

What’s your current credit score?

If your credit score is in the Near Prime category or thereabouts, you might still be able to salvage a good deal with mainstream refinance lenders. However, if you have a credit score in the Subprime or Deep Subprime category, you might have to approach lenders specializing in bad credit.

Did you get dealer financing when you purchased the car?

The car dealerships always have an incentive when customers finance their vehicle from them. Not only can they add on dealership fees and other charges as add-ons, but it also reduces the number of choices you have. It’s common for dealerships to charge high APRs – especially if you have less-than-perfect credit.

When did you last refinance your car?

While there is no limit to how many times you can refinance a car, it can influence your credit score and may cause your debt to grow. When you refinance for a longer term, you risk falling upside down on your car loan or owing more than the car is worth. If you refinance for lengthier terms many times, the danger increases.

Can you refinance a car loan with bad credit?

refinance your car

While refinancing is typically done when you have a good credit score, there may be situations where you’re desperate. You may have a bankruptcy or repossession on your financial record or may have gone through a cash crunch. This may have mauled your credit score badly, leaving you down in the dumps.

If you badly need to refinance your car no matter what, try to follow these steps:

1. Check your credit report and credit score

It’s always helpful to know what is your exact credit score and whether you can do anything to improve it. If you have a previous bankruptcy, you can apply to specific lenders who consider such applicants. You can access the one free credit report from each reporting agency by using annualcreditreport.com.

2. Reach out to your lender

Sometimes, it’s better to reach out to your current lender before applying for bad credit refinancing. If they understand your situation, they may be able to give you some leeway to continue with the current loan, perhaps with some adjustments. Some lenders may be willing to refinance their own loans. Others may ask you to wait until auto rates in the economy have gone down. Either way, it won’t hurt to try!

3. Shop around and find bad credit lenders

If you have bad credit, then don’t repeat the same mistake you did the first time. Choosing the first offer without shopping around is not recommended – instead, compare rates and make a decision. It’s much easier when you have a refinance platform like Way.com, where you can even pre-qualify for certain lenders.

Based on a soft pull of your credit score, you can get a range of offers from lenders specializing in bad credit. Once you go through your options, choose one that has the most benefit for you!

Best lenders to refinance a car with bad credit

Capital One

It is one of the most prominent bad credit lenders and also lets you pre-qualify without hurting your credit score.

  • Starting APR: 4.1%
  • Loan terms available: 24-84 months
  • Minimum amount: $7500-$50,000

Auto Credit Express

  • Starting APR: 3.99%
  • Loan terms available: 24-84 months
  • Minimum amount: $7500-$50,000

Can you refinance car loan with bad credit?


  • Starting APR: 2.49%
  • Terms: 24–84 months
  • Minimum amount: $5,000

The only drawback is that you may have to pay an application fee. But this could be worth it if you had bad credit and really want to refinance.

Auto Approve

Auto Approve also allows a break on payments for 45 days from the day you sign, with a 90-day period for qualified applicants.

  • Starting APR: 2.25%
  • Available loan terms: 12–120 months
  • Minimum loan amount: $8,000


  • Starting APR: 1.99%
  • Loan terms available: 24–84 months
  • Minimum loan amount: $2,500

Also read: How to lower your car loan payments

Steps to follow to refinance if you have bad credit

refinancing your auto loan

  • You should evaluate your credit history before refinancing your auto loan. Look for any inaccuracies or anomalies that need to be corrected. 
  • You could consult with an independent auto loan provider online to search car loan refinancing rates and choices. Based on your credit score and personal information, these independent providers search for the best offer available.
  • Have a bad credit car loan? Make timely payments to improve your credit score to refinance the loan later. Once your credit score is good, put down a larger down payment on the loan to qualify for a lower interest rate.
  • If you’ve taken out a loan with an APR of 21 to 25 percent, you should refinance it as soon as possible. This is because most lenders will provide you with a car loan with most of the interest paid in the first two years. Furthermore, because the car loan lender will not refinance your loan, you will need to contact other banks or financial organizations to obtain a refinanced loan.
  • Another strategy to save money on your auto loan is to make extra monthly payments toward the principal to pay it off faster. However, you should read your car loan contract carefully before signing it since some lenders charge you a pre-payment penalty if you pay off the loan before it expires.

Frequently Asked Questions (FAQ) 

What is the lowest credit score you can have to refinance a car? 

There is no particular lower limit to refinance a car. As long as you can find a bad credit lender who’s willing, you can refinance your car. However, to get the best rates, try to improve your score to above 660.

Can you refinance with a 500 credit score? 

While difficult, you can still find a lender to refinance a car with a 500 credit score. However, you may have to settle for a very high APR and a very long loan term. If possible, build your credit score to above 660 to get the best rates.

How soon can you refinance a car loan with bad credit? 

We’d recommend waiting for at least 6 months so that you can build up your credit score. That way, you can get the most out of refinancing.

Does refinancing a car hurt your credit? 

There will be a drop in your credit score by at least a few points when you refinance. But you can easily build it up with consistent payments.

Can I refinance my car with the same lender? 

Yes, you can refinance with the same lender as long as there is nothing prohibiting it in the financing agreement. Some lenders don’t refinance loans taken from them, while others don’t have such clauses.

How to refinance your car loan when you have bad credit

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