You’ve probably heard horror stories about people who can’t refinance their auto loan because of a bad credit score. But that doesn’t have to be your reality. There are plenty of options available to you if your credit isn’t great—it just takes a little digging. Here are some tips for finding alternatives to refinancing an auto loan if you have bad credit:
Take Out a Personal Loan
Personal loans are unsecured loans that can be used to refinance an auto loan. They have a fixed rate, term and monthly payment.
Personal loans are an alternative to refinancing your auto loan if you have bad credit because they’re easier to get than refinancing and don’t require as much paperwork or collateral.
Look Into Home Equity Loans
If you have poor credit and need a strong loan, look into home equity loans. Home equity loans are a type of loan that uses the equity in your home as collateral. This means if you default on your payments, the lender could take ownership of your house.
However, this can be an attractive option for people looking to get out of debt because they have few other options to refinance auto loans with bad credit scores.
Home equity loans also have lower interest rates than most refinancing offers (around 4%) and require smaller down payments than traditional refinances do ($5k-$10k). This means that even if you don’t have enough cash lying around for an auto refinance or new car purchase but still need new wheels–a home equity loan might be worth considering!
Getting a Cosigner
If you have a cosigner, they can help you get approved for a car loan. A cosigner is someone who signs on a loan or credit card application to help the applicant qualify for financing. The person being cosigned for is responsible for making payments if the original borrower fails to pay them. If this happens, it’s called becoming delinquent on your debt–and it could have serious consequences for both parties involved.
Lantern by SoFi professionals says, “It’s a good idea if you can get a cosigner whose credit is in a good position.”
A common misconception about cosigning is that it will boost someone else’s credit score by having another person attached as an additional account holder on their account.
However, having multiple accounts open in tandem doesn’t work like that: Only one of those accounts is used when calculating an individual’s overall FICO score (the most widely used method) and adding another person won’t increase its value at all! But there are other reasons why getting a cosigner might make sense.
Try a 0% Interest APR Credit Card
- If you have a credit card with a 0% interest rate, use it to pay off your auto loan.
- Pay off the auto loan with a credit card.
- Use the 0% APR credit card to make monthly payments on your new car loan instead of making monthly payments in person at an auto dealer or bank branch location.
If you have poor credit, refinancing your auto loan might not be an option for you. However, there are other ways to get the financing that you need. For example, getting a home equity loan could help pay off your car if you have enough equity in your home. Alternatively, personal loans offer terms that may be more lenient than those offered by lenders who specialize in auto financing. If none of these options work out for you, then consider getting cosigners on any loan applications!