In general a bad credit score will require paying much higher interest rates. Sometimes it can also adversely affect your getting auto refinance. It can cause you to pay more for insurance. Although it is beneficial to refinance your car loan during the early stages and particularly before third or fourth year, the benefit after the fourth year is much less.
The interest on your car loan is paid during early payments and therefore you should seek auto refinance as soon as interest rates come down. People having a bad credit score are required to pay very high interest rates, even up to 20 to 25% percent. It is very difficult to pay this for a long term. The following tips are useful for people having a bad credit score.
1. Wait for few months: Wait for at least 3 to 6 months after taking the first car loan. After a period of 6 months you can start looking for auto loan refinancing companies. In refinancing you are not taking out more loans. You are just making a transfer from one financial institution to other. By transferring the loan you can reduce your APR. Most of the time financial institutions do not object to such a move.
2. Get help from professionals: If you are unable to find yourself an auto refinance company, get help from some professionals. There are many websites that find auto refinance for people with bad credit.
3. Pay some principal amount: You can buy an affordable APR by submitting some principal amount to the financial institutions. This is a good way of getting a few percentage points lower APR. You get the benefit of auto refinance and at the same time you will repay your car loan quickly.
4. Maintain good bank records for 6 months: The majority of bank and financial institutions look for your past 6 months bank records. So, before refinancing your car you should ensure that you pay bills on time for at least six months. Banks may then offer you an easier car refinance deal.
5. Have a copy of your credit score: You should always check your credit score before you decide. You can get a copy of your credit report online from any of the credit referencing agencies like Experian or Equifax. If you find any discrepancy, you should immediately contact the agency. Many salespersons or loan officers may mislead you about your credit score and may charge higher rates. So, you should have your credit report with you while negotiating.
6. Another trick I’d use is to type something like ‘car refinance forum’ into a search engine, and see what comes up. If you find a lively forum, you can ask questions about the lender you’re keen on, or ask for other users’ recommendations.
7. If your credit Score is less than 600 don’t submit loan applications that keep getting rejected. The rejections will drop your credit score even further. Look for a specialist bad credit lender.
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