The Good News for People with Bad Credit: Yes, You Can Refinance That Auto Loan - Millstream Area Credit Union
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April 26, 2022

The Good News for People with Bad Credit: Yes, You Can Refinance That Auto Loan

The Good News for People with Bad Credit: Yes, You Can Refinance That Auto Loan

If your credit score is lower than you would like, you may think you are in no position to refinance the auto loan you’ve been struggling to shoulder. With the right approach, however, you may soon find yourself on the road to a better credit score—and with a monthly car payment that suits your financial situation.

Before refinancing, however, you need to check your credit score. Save money by opting for a free credit check here. Reviewing your report will give you an opportunity to discover any errors that might be weighing down your score. 

Not sure what to look for? Check out this list of common errors identified by the Consumer Financial Protection Bureau. If you are among the one in five whose credit reports feature errors, this site can also help you address anything that is amiss.

If, on the other hand, your score is accurate, fret not. You have options. If your situation is not dire, consider taking the time to improve your credit score before attempting to refinance. Boost your score with these strategies from Investopedia. If your situation is more urgent, go ahead and talk to a potential lender about refinancing. 

One surefire way to lower your monthly payment is to refinance with a longer term. You will pay less each month because your repayment period will be longer, but you will likely pay more for the loan in the long run because interest will accumulate longer, too. If this option frees up much-needed money each month, however, paying more overall might be acceptable. 

You also may be able to lower your monthly payment if lending rates have dropped since you purchased your car. With a lower credit score, however, even if rates have dropped, you may struggle to secure a better rate on your own. That’s where a cosigner could make a difference! If a trusted family member or friend with good credit agrees to cosign your application, you may be able to lock in a better rate. 

Before refinancing, find out if your current lender assigns prepayment penalties. When you refinance, after all, your new lender pays off your original loan in order to open the new loan. If your current lender penalizes people with fees for paying off loans early, refinancing may still be a good idea if the benefits of a lower monthly payment outweigh the costs incurred by any fees.

When it comes to choosing a lender, credit unions tend to offer lower auto loan rates than banks because they are member-owned, not-for-profit organizations. While shareholder-owned banks are structured to produce profits for their shareholders, credit unions are structured to focus on the financial well-being of their members.

At Millstream Area Credit Union, that’s what we want to do for you: We would love to help you refinance your auto loan so you can pay less and save more each month because your well-being matters to us. Reach out when you’re ready. It would be an honor to help you get on the road to a brighter financial future!

Lighten your financial load by applying to refinance your auto loan today through Millstream Area Credit Union. Even if your credit score is poor, we can work with you to lower your monthly payment so you can feel better about your finances.

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