There’s a little known fact about bad credit car loans that saves people time, money and their credit rating – it is in fact possible to refinance your bad credit car loan after a certain amount of time. If you’ve been paying off your car loan on time and in full each repayment period, you could be eligible to refinance your car loan at a more competitive interest rate. In some cases, you could be getting a “prime” interest rate if your credit has improved significantly.
First off: You need “correctible credit”
Bad credit doesn’t “disappear” overnight. If you have been diligent with your repayments, have paid off debts and/or have increased your income, financiers who once saw you as a big risk may now see you in a different light. Banks and lenders do notice your efforts to improve it and may reward you for it. If you are on the way to having good credit, you will have what’s known as “correctible credit” and be seen as a lower overall risk by financiers. This gives you more choice of lenders, lower interest rates compared to “sub-prime” rates and options that are more flexible.
Trading in to trade up
To begin refinancing your bad credit car loan you must be prepared to trade in your car for a newer model or one close enough to it. Trading in your car will wipe out your bad credit car loan debt. From a neutral position, you can then take out a new car loan and (in some cases) a new car. It’s unlikely that you’ll gain approval for “prime” car loans, but you will no longer be paying the highest interest rates that your first loan came with.
Another “option” to refinance your bad credit car loan is to apply for a personal loan to “purchase” the remainder of your bad credit car loan. This option is usually a bad idea and must satisfy many criteria to work properly. Firstly, your bank, lender or credit union must see you as a very low risk to consider lending money “unsecured,” or without collateral. Secondly, your original bad credit car loan terms may impose penalties for paying off a loan early. Trading in and up is the safest way of refinancing.
Talk to a financial professional
The financial professionals at BadCreditCarLoans.com.au have years of experience in helping people with “correctible credit” find car loan refinancing options. Contact us today for a obligation free consultation.