Best Auto Loan Refinance for Bad Credit

Refinancing allows you to access a lower interest rate or a longer repayment term, lowering your monthly payments. But here’s the catch—many lenders will only work with borrowers with good or excellent credit.

Getting approved for an auto loan refinance can be tricky with poor credit, but it’s not impossible. To get the most competitive rate, compare lenders and review the terms and fees carefully. Keep reading, as we’ve researched the best auto loan refinance options for bad credit.   

The best place to refinance an auto loan with bad credit

According to the FICO score model, poor credit falls within the 300 and 579 scoring range, and fair credit is in the 580 and 669 range.

Finding the right lender is essential if you have bad credit and are interested in an auto loan refinance. You’ll likely end up with a higher-rate loan than you would with good or excellent credit. You may also need to meet other requirements, such as having a certain income level. 

But it’s possible to find a competitive rate with a reputable lender. We researched five loan marketplaces that offer auto refinancing to borrowers with bad credit. 

	Min. monthly income	Min. credit score
RateGenius	$2,500	540
iLending	$1,500	560
OpenRoad Lending	$2,000	480
AutoPay	Not disclosed	540
Upstart	Not disclosed	510

Reviews of the best auto loan refinance for bad credit

Embarking on a journey to refinance your auto loan while nursing a bad credit score can be daunting. However, this round-up of top lending companies offers viable options that cater specifically to individuals in your shoes.

RateGenius: Best for comparison shopping

View Rates

LendEDU rating: 4.9 out of 5

• Effortless comparison of auto refinance rates
• Broad network of lenders
• Convenient online application process

RateGenius is a stand-out for individuals looking to shop around and compare auto refinance rates. It connects you with an array of lenders from its extensive network, offering you a buffet of options.

Its online application process adds to the convenience, making RateGenius a compelling choice for those wanting to find the best deal on refinance rates.

iLending: Best for flexible terms

View Rates

LendEDU rating: 4.8 out of 5

• Customizable loan terms
• Transparency in lender dealings
• Painless pre-approval process

iLending earns its stripes with its offer of flexible loan terms. This means you can tailor your loan term to your personal financial circumstances.

Its commitment to transparency aids your understanding of your financial commitment. The pre-approval process has also been praised for the ease it provides, making iLending a worthy contender for those seeking loan flexibility.

OpenRoad Lending: Best for sub-500 credit scores

View Rates

LendEDU rating: 4.5 out of 5

• Welcomes sub-500 credit scores
• Offers loan terms up to 84 months
• Provides guaranteed savings

If your credit score languishes below 500, OpenRoad Lending is a strong option. OpenRoad is comprehensive, offering loan terms up to 84 months, allowing you a longer period to pay back.

OpenRoad Lending assures savings on your existing loan. Such an assurance is refreshing for borrowers with a lower credit score, making OpenRoad Lending a solid choice for them.

AutoPay

View Rates

LendEDU rating: 4.2 out of 5

• Wide refinance options
• Dedication to lowering monthly payments
• Provides straightforward online platform

AutoPay is a reliable option with its wide set of refiance options, aimed at lowering your monthly payments.

Its online platform works seamlessly, keeping the application process free from hurdles. Considering these factors, it’s clear that AutoPay is a reliable contender for borrowers.

Upstart

View Rates

LendEDU rating: 3.9 out of 5

• Uses AI for Fair Assessment
• Considers education and job history
• High customer satisfaction rating

Upstart is unique in its use of artificial intelligence to assess loan eligibility. This means current income is not the sole determinant.

The platform considers education and job history in its evaluation, providing an opportunity to individuals who are financially rebuilding. Coupled with a high customer satisfaction rating, Upstart proves to be a good option for those seeking a tech-forward solution.

Relationship between credit score and auto loan refinancing

Your credit score impacts your eligibility to refinance an auto loan. It also affects your interest rate, repayment terms, and fees. The higher your score, the less it costs to borrow money, and the reverse is also true—the lower your score, the more it costs. 

For example, imagine you are approved to refinance an auto loan with bad credit.

Loan with bad credit
Loan amount	$20,000
Interest rate	11%
Repayment term (months)	60
Monthly payment	$434.85
Total interest paid	$6,090.91

Now, imagine you get the same loan amount and repayment term, but with good credit.

Loan with good credit
Loan amount	$20,000
Interest rate	4.99%
Repayment term (months)	60
Monthly payment	$377.33
Total interest paid	$2,639.98

A higher credit score could save you nearly $3,500. 

The good news is that successfully refinancing your loan and making the required payments can help improve your credit score. Your score might temporarily decrease due to the credit check for the loan, but in the long term, with on-time payments, it can increase. 

Why would you refinance an auto loan with bad credit?

The primary goal of refinancing an auto loan is to save money on a car payment. When your initial loan has a high rate, the interest charges can add hundreds or even thousands of dollars to your total loan amount. Even if you have bad credit, refinancing may provide access to a lower rate. 

Here are other common reasons to refinance an auto loan with bad credit.

• Your credit score improved: If your credit score has improved since you applied for the initial car loan, you might be able to get a lower rate by refinancing. That’s true whether your score went from 500 to 600 or 600 to 700. 
• You want to change your repayment term: Refinancing could also give you a longer repayment term, often meaning lower monthly payments. But since refinancing extends the term, you could pay more interest than you would with your original loan. Despite this, refinancing to a longer-term loan may make sense if you struggle to manage your payments.
• You want to lower your monthly payment: You might need a lower monthly payment. Refinancing with a lower rate, longer repayment term, or co-borrower might help you accomplish that. 

How to choose the best bad-credit auto loan refinance

When preparing to refinance an auto loan with bad credit, consider several lenders’ requirements, available terms, and rates. Shopping around can help you get the best refinance loan for your situation.

Consider prequalifying with different lenders for insight into what rates you may get. Many lenders offer the option to prequalify with a soft credit pull, which won’t harm your credit score. 

Once you’ve found a loan that meets your needs, gather the necessary documentation for your application. Many lenders request the following information as part of the application process:

• Copy of a government-issued ID
• Proof of income and employment
• Copies of bank statements
• Copy of your car loan documents
• Your vehicle identification number (VIN)
• Copy of your car insurance policy

Preparing the information before you apply can streamline the process. After you’ve applied, you’ll wait for a loan decision. The time frame for approval can vary by lender, but it may be as short as one day. 

Ask the expert

Erin Kinkade

CFP®

Other options could be to borrow a car from a trusted friend or family member while you build your credit score/report. You could also add a cosigner. If you qualify with a high rate and have no other options, then go with the higher rate and, within the next six to 12 months, work on making on-time payments and reducing your debt-to-income ratio while also not applying for additional loans. Once your credit score improves, try refinancing the auto loan to better terms.

FAQ

How does bad credit affect my ability to refinance?

Bad credit can make it more challenging to refinance a loan. While many lenders work with borrowers with good or excellent credit, fewer lenders offer options for those with poor credit. You may also receive a higher-rate loan if your credit is bad or fair. 

Can I get a cosigner?

Some lenders may allow you to refinance your car loan using a cosigner. Using a cosigner with excellent credit may result in a lower-rate loan with a more desirable term. Cosigners also agree to assume responsibility for the loan if the primary borrower defaults, which helps lower the lender’s risk. 

Are there ways to get lower interest rates with bad credit?

Working with a cosigner or co-borrower could help you get a lower interest rate. You may also work on improving your credit before you refinance because you’ll likely receive a lower rate with a higher credit score. 

Can I refinance my auto loan if my car has been repossessed? 

It will be difficult to refinance your auto loan if your car has been repossessed in the past. That said, specific lenders may allow you to do so. Be aware your refinance loan may have a high rate. 

Can I refinance again after my credit score improves?

It’s possible to refinance your auto loan again if your credit improves. This could result in a lower interest rate. 

Steps to take to help improve your credit score include:

• Make your monthly payments in full and on time.
• Take out a credit-builder loan.
• Avoid applying for several new accounts.
• Maintain a low credit utilization, which should be below 30%. (For example, if your credit card has a $10,000 limit, your balance should not exceed $3,000.)

How can I avoid scams and predatory offers?

To avoid scams and predatory offers, ensure you do your due diligence. Research lender history, look at what previous customers have said on sites like the Better Business Bureau (BBB), and never sign anything you haven’t read. Also, compare options and avoid loans with astronomical interest rates.

Are there banks that will refinance a car with bad credit?

Even with bad credit, a borrower still has refinancing options. Several financial institutions specialize in helping individuals with less-than-stellar credit scores. Companies like Autopay offer auto loan refinancing for individuals with bad credit.