A car owner can apply for an auto refinancing loan to pay off an existing loan. A refinance loan will usually come at a lower interest rate than the existing loan. Auto refinance is ideal for people with bad credit who are undergoing a tough financial crisis that has made them unable to repay the current loans they have. With auto refinancing, the car owner can do several things including consolidating his debt or purchasing a new car.
There are a number of ways through which you can qualify for auto refinance when you have bad credit. These include:
1. Find a cosigner when you go to apply for auto refinancing
One way of qualifying for bad credit auto refinancing is to find a suitable cosigner. Ensure that the cosigner has good credit scores and is trustworthy. Financial institutions will require the signature of the cosigner on the application form before they approve you for refinance. Before a bank approves any type of loan, they have to go through the credit report of the borrower as well as the cosigner’s. It is much easier and quicker to get approved for a refinance loan if the cosigner has a good credit history.
2. Improve your credit scores
If you do not want to use a cosigner to get an auto refinancing loan, you have to find a way of improving your credit scores. Request your credit report from any credit bureau and check for any errors. A small erroneous entry in your report can significantly affect your scores. Report any errors you find to the credit bureau. When corrected, you may find that your credit ratings have improved. You can get your credit report for free once every year from TransUnion, Experian and Equifax.
3. Look for a subprime lender
Another option you have is to approach a subprime lender. This is a lender that is specialized in financing borrowers who have a poor credit history. The lender will approve you for auto refinancing but at a higher interest rate compared to what the mainstream lenders charge. Carry out research online and compare the rates of different subprime lenders to find one who will offer you the cash out refinance at an affordable rate.
The above are three ways through which you can get cash out refinance even if you have poor credit scores. Your financial advisor can help you choose the method that will work best for you. When you pay the auto refinancing loan on time, your credit score will improve. To qualify for car refinancing with bad credit, you must have completed at least half of the payment of your current loan.