Can you refinance an upside down car loan and you have bad credit? Refinancing a car loan helps to reduce the interest rate so that you can save money on the new car loan. This is especially true when the market resale price of your car has already dropped under the remaining balance you owe. Many car owners have no idea how much their cars have depreciated until they try to trade in for a new vehicle. For example, they still owe the lender $10,000 but their car’s current value is only $5,000. Furthermore, many car owners that trade in for a new car ended up with upside down auto loans because they roll the balance onto the new car loan. That may also mean you owe a lot of money at high interest rates.
All cars and trucks depreciate very fast unlike homes and property. Unless you put down at least 30% to buy a car, you can never build car equity faster then its resale value depreciating. Worse still, buyers usually choose 60 month car loans in order to minimize their monthly payment amount, thinking it is cheap to buy a car with bad credit but that is exactly why you end up with upside down car loans. Note that you cannot get $5000 car title loans if you have negative equity.
The way car loans are designed is that most of your monthly payments within the first two years are not used to pay down the balance you owe but is to pay for the interest amortization. So you still owe the lenders nearly 100% of the original car price after 2 years.
Most home owners can use a home equity loan at very cheap rates to pay off their upside down car loan. They could even pay for a new car in cash instead of using a bad credit car loan since the home equity loan will be cheaper. This way, you are free to sell off your fully paid up car or truck whenever you need the money or wanted to change to a newer vehicle.
When you refinance at a lower interest rate, the new lender will help you pay the first car loan in one lump sum. Your refinanced auto loan can then be paid off slightly faster if you continue with the same monthly payments. By reducing the loan term, you can avoid getting upside down on your auto loan again as the difference between the car resale value and balance owed is closed significantly.
Many car dealers can help you roll any negative equity in your trade in car into a new loan for a new car purchase. They call that an value added service when the truth is that they get more commission with a larger loan while you increase your overall debts. Every time you trade in and buy a new car with bad credit, you owe the lenders more money than ever.
When you have problems paying the increasing monthly installments on your high interest upside down car loan, the best way is to refinance and extend the loan term so that each monthly payment is reduced. You cannot sell away the car since you are holding negative equity. Do it as soon as possible to avoid your car or truck from being repossessed. Think carefully if it is worthwhile to take a bad credit personal loan to keep your car safe from repossession for another few weeks,
You can find the best refinance lender for upside down auto loans online by requesting free car loan refinance quotes from several lenders and compare the offered rates and terms. Some lenders will even offer to pay early prepayment fees to your existing car financing company, but these usually quote higher car refinancing rates. You need to compare carefully the different terms and offers to get the cheapest way out of upside down car loans with bad credit.
When you refinance your upside down auto loan, you can also choose more appropriate payment schedules to fit your current budget. For example, choosing a shorter loan term means you get rid of your car loan faster and save more money, or refinancing to a new five year car loan means your monthly payments can be reduced significantly so that you will not have problems with monthly payments.
For bad credit car refinancing, you need to prepare the recent 1 to 2 years of tax returns and the latest two monthly pay stubs. Try asking your current lender for refinancing an upside down car loan first. If you wanted to pay off the upside down auto loan faster, try other lenders as well for competitive rates.
Both new car owners and used car buyers can benefit from refinancing upside down car loans in order to get rid of their older vehicles. The sooner you refinance bad credit car loans, the more money you can save on interest fees.