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Refinance your car with bad credit

You Can Refinance Your Car with Bad Credit

In the latest economic down turn, millions of families have had to find ways to cut their expenses in order to live on less income. American citizens and people all over the world have down sized their homes, reduced their spending to include necessities only, cook meals at home rather than eat out and cut other living expenses wherever they can. Few think of reducing their monthly car payments by refinancing their car loan because of their bad credit.

Is it possible to refinance a car loan with bad credit? If so, how difficult is the process?

Many people are familiar with refinancing a mortgage loan, but refinancing a car loan isnít as well known. This type of loan is actually simple and easy for people with a good credit rating, but considerably more difficult to get for those with bad credit. Any subprime (high risk) loan requires more than the usual protective measures to reduce risk of default for the lender. Yet bad credit car loans are refinanced dozens of times a day.

Lenders are willing to make these loans because the car serves as collateral and car owners will desperately do whatever it takes to keep their cars. Transportation is not a luxury but a necessity in todayís society since public transportation is not always available.

What are Good Reasons to Refinance a Car Loan?

There are 5 particularly good reasons to refinance a car loan with bad credit:

  1. The most obvious reason is to reduce monthly payments. Reduced car payments frees up money for other expenses and obligations. Be aware that the terms of the refinance may have you paying much more for your car because of an increased interest rate and a longer payback time.

  2. You can use refinancing as a means to improve your credit rating. Making your payments every month and on time helps substantially. Some lenders who specialize in helping consumers improve their credit rating will report your timely payments monthly to one or more credit bureaus.

  3. When interest rates are much lower than when you first financed the car is a good time to refinance. This is an important area to watch. You may need to pay a higher interest rate than before if you have a lower credit score than before.

  4. If you credit rating has improved since you first financed your car, you may qualify for a lower interest rate that will reduce your monthly payments. Make sure that the term of the loan isnít increased to the point that youíre paying more for your car than ever before.

  5. Whenever you need lower monthly payments is a good reason to investigate the possibility. Youíll find lenders to be more flexible when the number of applications for refinancing is down which can happen almost anytime. If you donít have an immediate need for refinancing a car loan but youíll be pursuing this option in the near future, start the application process early to hunt for the best deals.

Lenders are refinancing auto loans every day as awareness of this method grows. Reducing monthly payments is the most popular reason for this type of loan and at the same time it can help to improve your credit score. You can also improve your credit score by using the money you save on car payments to reduce other debt.

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