A bad credit auto refinancing loan could substantially reduce the cost of buying a car. Once repayments have been made punctually for approximately two years, lower car payments can be achieved. This is the case even after filing for chapter 7 bankruptcy and other serious credit transgressions. Although bad credit history repair generally happens naturally over time, there are also ways to improve credit scores prior to refinancing auto loans. Customers may also wish to consider clearing some of the outstanding vehicle finance.
Why a Bad Credit Auto Refinancing Loan Helps to Save Money
A better credit score can be achieved, provided that current and future credit agreements are complied with. Refinancing a car loan after a couple of years can help to save money because lower auto refinancing rates will now be available. Although the rate of interest will be higher than for people with an excellent credit rating, there will be more favorable opportunities for those who intend to refinance a car. It is simply a matter of establishing a reliable repayment history and establishing a higher percentage of vehicle equity.
Increased Equity Leads to Improved Auto Refinancing Rates
Although cars values gradually depreciate over time, so does the amount of money owed to the vehicle finance company. Lower car payments can be achieved by building equity or offering the lender a higher auto deposit. Most bankruptcy car loans require a deposit of upwards of 30%, but auto refinancing rates will be lower to customers who wish to clear some of their car finance from personal savings. Better car financing deals are available because it is easier for the lender to recover their money.
How to Get a Better Credit Score Prior to Refinancing Auto Loans
Although poor credit repair is achieved gradually, there are steps that can be taken to improve credit. The following methods can be used to rebuild credit scores:
- Request a free credit report from Experian, Equifax and TransUnion and check each report for errors. For example, if a debt shows as active and it was included in a bankruptcy agreement, it can be amended personally or with the assistance of a credit repair attorney.
- Avoid maxing-out credit cards. Always use 10 to 30% of the available credit limit and settle this in-full at month end before applying for a bad credit auto refinancing loan.
- Pay down debt as owing less money results in a better credit rating. The lower the amount of money owed, the less likely the customer is to default on the agreement.
- If an unsecured card isn’t available, consider signing-up to a secured credit card. Lenders report to credit reference agencies so punctually repaying revolving debt is fundamental to achieving a good credit score rating.
Refinance a Car for Lower Car Payments
Once repayments have been made for a minimum of two years, bad credit auto refinancing helps to save money. It is essential that all payments are made punctually in order to get a better credit score. A higher credit rating coupled with greater vehicle equity leads to lower auto refinancing rates in the future.