Q:

Can you refinance an auto with bad credit?

A:

Quick Answer

It is possible to refinance a car with bad credit, but it usually requires borrowing money in order to pay off the remainder of the loan. Although this sounds counterproductive, it can be beneficial if the owner is currently paying a high interest rate on his car payment.

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Full Answer

The amount of the refinance is determined by the amount owed on the vehicle, rather than the value of the vehicle at the time of refinancing. Lenders are only concerned with how much money is being borrowed. An applicant with bad credit must prove that they are making an effort to improve their credit. Approval is more likely if the applicant's credit is higher than it was when he or she first applied for the car loan.

To refinance a car, the car usually cannot be more than five years old, although there are some refinance companies who will accept cars ten years old or more. The car also must also have fewer than roughly 70,000 miles on the odometer. Once a car has been refinanced, it's essential that the borrower do everything he or she can to not default on the loan. A borrower will have a better chance of successfully refinancing a car if the borrower makes roughly $2,000 a month or more, as of 2014, and is refinancing for a total that stays within a predetermined limit.

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