6 Ways to Refinance Auto Loan with Bad Credit History
If you are facing challenges sorting out auto loan repayments, you can now opt for refinancing and replace your existing debt. This can work to your advantage since your new debt can be availed at a relatively lower APR and a repayment plan that will be more affordable. Even with a low credit standing, you can still get approved for refinancing by sticking to the following steps:
Check your credit file
In most cases, lenders will use your credit scoring to make important decisions like credit period to allow and applicable interest rate. It is therefore wise to scan through your credit report and confirm that the details provided are accurate. In case of any unclear entries, you should have them rectified before considering refinancing. This is a move that can result to significant changes on ranking.
Clear outstanding payments
Before approving your application, most lenders will be interested on how you have been handling payments on the existing loan. You will therefore stand higher chances of qualifying if you have been making prompt payments. If not so, you should try to clear any unsettled payments before sending in your application. This should apply even to other debts that you may be having.
Provide proof of income
The lenders will be highly interested on how you will be clearing your debt once your application goes through. You can easily convince them of receiving timely payments by providing proof of a steady monthly income. This should be enough to support the new debt and any other financial obligations. Some loan providers will be very specific on employment but there are others who will accept any other source of income.
Consider different options
Obtaining auto refinancing from traditional lenders with poor ranking can be extremely challenging and this involves a very tedious application process. To boost your chances of qualifying, you should consider other alternatives like credit unions and private lenders. You should then ask for quotes from different sources to compare them for competitive interest rates and flexible repayment terms.
5.Considering loan modification
You can consider requesting for auto loan modification if you are not interested in refinancing your current debt or if your request is not approved. This is where you should approach your lender to have your current payments substituted for a new repayment plan that will be easy to stick to. You can also negotiate for any missed payments to be paid towards the end of the agreed credit period. Loan modification will help you to avoid missed payments or defaulting.
6.Using an auto refinance calculator
You can now use a car loan refinance calculator to estimate the monthly payments applicable to any offer you are considering. This will also help you understand the savings that you will be enjoying every month. There are some calculators that can give you an APR estimate based on the amount involved, the desired repayment period and your credit rating. All this is meant to help you make the best choices.