Repair Bad Credit by Refinancing Your Car Loan

If you have bad credit, you’re not alone. This is a common issue impacting many Americans. There are many reasons why you may have a low credit score – you may have lost your job and struggled to pay your bills, underestimated your ability to afford monthly payments for a large purchase, made poor financial decisions, or incurred costly medical bills which you were unable to pay. Whatever the reason for your bad credit score, the good news is that there are steps you can take to rebuild your credit.

Did you know that refinancing your car loan can help you repair bad credit? This is an effective strategy that many people are unaware of when seeking to raise their credit score. Car loan refinance offers a variety of financial benefits. You can lower your interest rate and save money over the duration of your loan. You can also lower monthly payments, infusing additional cash into your monthly budget. In addition, you can use your new car loan to demonstrate that you’ve become a trustworthy borrower, which will raise your credit score over time.

How Does Car Loan Refinance Repair Bad Credit?

While refinancing a car loan results in an initial drop in your credit score, over time it can have a very positive impact on your credit. The initial drop is caused by the hard pull on your credit report, which indicates that you may potentially be taking on new debt very soon. However, this temporary drop in your credit typically rebounds within a few months once you demonstrate your ability to make your payments.

One of the primary ways to repair a bad credit score is to make all of your monthly payments on time for loans, credit cards, and other lines of credit. Therefore, refinancing a car loan provides you with an opportunity to demonstrate your ability to consistently make your monthly payments.

Because you’re usually able to lower your monthly payments by refinancing, it should be easier to stay current on these payments. In addition, you can use the money you save each month when you refinance to make your monthly payments on other forms of debt such as a mortgage or credit cards. If you’re able to start making all your monthly payments on multiple lines of credit, it will raise your credit score even higher.

There are a few things to keep in mind regarding your ability for car loan refinance to improve your credit:

• This is a long-term strategy – Your credit score won’t dramatically improve overnight. It can take a long time – possibly 6-18 months of making all payments on time – before you see a significant bump in your credit.
• You must make all your payments on time – The key to repairing your credit is to always make your payments on time. This signals to lenders that you have the ability to make good on the loans you take out. Missing even one monthly payment can potentially undo the positive work you’ve put in to repair your credit. To avoid this issue, you should set up automatic monthly payments. This ensures your payments will always be made on time, eliminating the risk that you may forget one month.
• The amount your credit improves depends on where it starts – In general the lower your credit score, the greater your ability to significantly raise it over time by making your monthly payments.
• Your payment history must be reported to the major credit bureaus – It’s critical that you check with the lender prior to refinancing to make sure they report your on-time payments to the three major credit bureaus (Equifax, TransUnion and Experian). If they don’t report these payments, your efforts won’t help to repair your credit. For this reason, you must refinance with a lender who reports your payments.

What Is the Minimum Credit Score to Refinance a Car Loan?

You can typically still refinance even with bad credit, which is why this is such a great strategy to repair your credit score. However, the interest rate you can get depends on your credit score. In general, you should qualify for the best interest rates with a minimum score of 700, and you should qualify for standard interest rates when your credit score is between 660-700.

If you have bad credit, it’s still possible to refinance your car loan. While you are less likely to qualify for the best rates, you can still usually lower your monthly payments by refinancing. You may be able to receive a lower interest rate compared with your existing loan, and this will lower your monthly payments. However, even if you don’t qualify for a lower interest rate, you can still lower your monthly payments by extending the repayment term when you refinance. This will free up money in your monthly budget to take the steps to repair your credit score.

iLending Makes Car Loan Refinance Easy and Hassle Free

If you’d like to refinance your car loan to repair bad credit, iLending can help. Our exclusive You First Approach™ makes refinancing easy and hassle free. One of our loan consultants will discuss your goals for refinancing with you in detail and then compare loan options from our network of over 50 nationwide lenders. This extensive network allows us to identify the best lenders who offer refinancing to individuals with bad credit. We’ll review the options with you that best align with your goals and help you determine the right loan to choose.

Once you’ve decided on a loan option, your loan consultant will assist you with the application process, ensuring it goes smoothly. In addition, your consultant will follow up to ensure your existing loan is paid off properly and you are set up for success with your new loan.

On average, iLending customers save $145 per month when they refinance their car loan. This savings can be used to help you repair your credit so that you can unlock more competitive rates in the future.

Apply now to get the car loan refinance process started.

What would you do with an extra $132* in your pocket?