Yes, you can refinance after bankruptcy, but you may not save as much as a borrower with a clean credit history. Bankruptcy results in a lower credit score, so you may only qualify for higher interest loans from a subprime lender. Here’s what you need to know if you’re looking to refinance a car after a bankruptcy discharge.
Refinance a car loan after bankruptcy
When you refinance an auto loan, you sign a new contract for your existing car. This is often done with a new lender, although it’s usually best to see if your current lender can refinance your vehicle first.
Refinancing is done to save money on the monthly car loan payment. Typically, this means qualifying for a lower interest rate, a longer loan term, or both. Refinancing is a good thing to do when your financial situation has changed or you want a lower interest rate to reduce your overall loan amount.
If you survived bankruptcy and were able to keep your car loan, you may want to look for a lower rate. However, depending on your credit situation at the time you took out the loan, you may not qualify for lower rates, as bankruptcy generally lowers your credit score. It’s a good idea to find out where your credit stands and assess the right lender for your situation.
According Assess genius30% of applicants with bankruptcies on their credit reports were approved for refinancing in 2019. These applicants received a higher interest rate than others but were still able to reduce their auto loan rates by 5 points on average.
Your credit score is one of the biggest determinants of auto loan eligibility, even when you’re refinancing. However, there are other factors lenders look at that might help if you are strong in these areas on your application. Indeed, when a lender considers you for the refinancing of a car loan, it is not limited to your credit score.
They also look at factors such as your debt to income ratio and your loan to value ratio as well as the value of the vehicle and your income. Subprime lenders know they can’t rely on your credit score alone, so they’re more inclined to look at the overall picture of your credit and financial life.
Also, if you were able to keep your car throughout your bankruptcy, you may be able to refinance your vehicle, but you may not be able to do so right away. It usually takes one to two years to rebuild your credit after bankruptcy, and a refinance lender may want to see your efforts.
At Auto Credit Express, our mission is to help borrowers get the most out of their auto loan experience, even if they refinance with bad credit. Our network of refinance lenders can help you get started on the road to savings. To get started, simply fill out our fast and free auto loan refinance application form.