Struggling with high car payments and stuck with a poor credit score? You’re not alone. The good news is that you can refinance auto loan with bad credit in 2025—and potentially lower your monthly bill, reduce interest, or even reset your financial roadmap.
With smarter tools, more flexible lenders, and growing demand for credit relief, bad credit no longer means “no chance.”
Table of Contents
What Does It Mean to Refinance an Auto Loan?
Refinancing replaces your current auto loan with a new one—ideally at a better interest rate or longer term. This can result in:
- Lower monthly payments
- Less interest paid over time
- A fresh start with a better lender
Can You Refinance With Bad Credit?
Yes, absolutely. While traditional banks may turn you down, credit unions, online lenders, and certain fintech platforms now specialize in helping borrowers with credit scores as low as 500.
Pro tip: many lenders focus more on your payment history and income than just your score.
Common Credit Score Thresholds in 2025
| Credit Range | Effect on Auto Refinance |
|---|---|
| 750+ | Best rates and approval odds |
| 650–749 | Competitive offers available |
| 550–649 | Limited but possible with higher APRs |
| Below 550 | Harder but not impossible with the right lender or co-signer |
Check your credit with AnnualCreditReport.com before applying.
Why Refinance an Auto Loan?
- You’re paying a sky-high interest rate
- You’ve improved your credit score since the loan started
- You want to extend your loan term for lower payments
- You found a better lender with fewer fees
- You’re struggling with monthly affordability
Pros and Cons of Refinancing With Bad Credit
Pros:
- Potentially lower monthly payment
- Easier budgeting
- Chance to rebuild your credit
Cons:
- Higher interest rates
- Loan term may extend (costing more over time)
- May be declined without a strong financial profile
Best Time to Refinance Your Auto Loan
Consider refinancing if:
- You’ve had the loan 6+ months
- Your credit score has improved, even slightly
- Market rates have dropped
- Your car has positive equity
In 2025, with auto loan APRs hovering around 6.99%–12.99% (Bankrate), refinancing can still make a big difference—especially if your original loan was 15% or higher.
Signs You’re Ready to Refinance
- You’ve never missed a car payment
- You’ve increased your income
- Your loan balance is less than your car’s value
- You plan to keep the car for at least 2 more years
What Lenders Look for Besides Credit Score
- Stable employment/income
- Debt-to-income (DTI) ratio
- Positive payment history
- Car mileage and age
- Equity in the vehicle
How to Improve Approval Odds With Bad Credit
- Bring a co-signer
- Make a few on-time payments in a row
- Pay down other debts to improve DTI
- Consider refinancing through a credit union like Navy Federal
Step-by-Step: How to Refinance an Auto Loan With Bad Credit
- Check your current loan terms and payoff balance
- Review your credit report
- Compare lenders that accept bad credit
- Apply for prequalification (soft credit check)
- Submit documents: ID, pay stubs, current loan info
- Review offers—look at APR, term, total cost
- Accept the best offer and sign loan agreement
- Your new lender pays off your old loan
- Start making payments on your new loan
Where to Find Lenders That Refinance Bad Credit Loans
- Online Lenders: myAutoloan.com, LendingTree
- Credit Unions: PenFed, DCU, Navy Federal
- Fintechs: Caribou, RefiJet
- Local community banks
Best Auto Refinance Lenders for Bad Credit in 2025
| Lender | Min. Credit Score | APR Range | Highlights |
|---|---|---|---|
| RefiJet | 500 | 5.99%+ | Works with multiple lenders |
| myAutoloan | 575 | 4.49%+ | Real-time quotes |
| OpenRoad Lending | 500 | Varies | Low income OK |
| PenFed CU | 610 | Competitive | Credit union member perks |
What Documents You’ll Need
- Government-issued ID
- Proof of income (pay stubs or W2)
- Car title and registration
- Current loan statement
- Insurance details
How to Compare Offers
Look at:
- APR (lower is better)
- Loan term (longer = lower payment, but more interest)
- Fees (application, prepayment, origination)
- Monthly payment
- Total cost of the loan
Use this Auto Refinance Calculator from Bankrate to estimate savings.
How to Avoid Refinancing Scams
- Never pay upfront fees
- Check lender reviews on BBB
- Avoid pressure to sign immediately
- Use secure, licensed platforms
Using a Co-Signer to Boost Approval Odds
If your credit is under 600, a co-signer with strong credit can:
- Secure a better rate
- Improve your approval odds
- Share legal responsibility for the loan
Make sure both parties understand the terms.
What to Expect After Refinancing
- New monthly due date
- Updated loan balance
- New lender contact info
- Possible small dip in credit due to hard inquiry—but improvement over time with on-time payments
How Long Does Auto Refinance Take?
- Prequalification: Same day
- Approval to funding: 2–7 days
- Total process: ~1 week
What If You’re Upside Down on the Loan?
If your car is worth less than your loan:
- Look for lenders that accept negative equity
- Make a cash payment to close the gap
- Consider waiting until you pay down more
Can You Refinance More Than Once?
Yes—if your credit improves or rates drop again, you can refinance again in the future. Just make sure the savings outweigh the effort.
Other Ways to Lower Auto Payments Without Refinancing
- Request deferment (temporary relief)
- Trade in your car for a cheaper one
- Negotiate a modified payment plan with your current lender
- Increase your deductible to reduce insurance premiums
FAQs About Refinancing Auto Loans With Bad Credit
Can I refinance my car loan with a 550 credit score?
Yes. Look for subprime-friendly lenders like RefiJet or OpenRoad Lending.
Will refinancing hurt my credit?
A small dip from the hard inquiry—but it can improve long-term with on-time payments.
Do I need a co-signer?
Not always, but it helps improve your rate if your score is under 600.
How soon can I refinance a car loan?
Typically after 6–12 months of on-time payments.
What happens to my old loan?
The new lender pays it off, and you start fresh with new terms.
Conclusion
Refinancing your auto loan with bad credit in 2025 is not only possible—it’s a smart move if you’re stuck with high interest or struggling to make payments. With more inclusive lenders, online tools, and flexible options than ever before, you can turn your car loan from a burden into a manageable, credit-rebuilding opportunity.
Be patient, compare offers, and don’t settle for the first “yes” you hear. Your financial comeback might start with a better car loan.
External Links:
- Bankrate Auto Loan Refinance Calculator
- myAutoloan Auto Refinance
- LendingTree Auto Refinance Offers
- BBB Business Ratings
