Can You Refinance a Car Loan with Bad Credit?

Jul 8, 2026

Signing for a car loan when your credit was at its lowest often means locking in a payment that's harder to carry than it should be. The encouraging news is that you aren't stuck with it. You can refinance an automobile with bad credit more often than you might think; it's more difficult, but rarely impossible, and borrowers with low scores frequently refinance their loans while securing payments that suit their budgets far better than their original terms. 

The key is recognizing that approval depends on much more than a single number. Lenders look at your full financial situation, not just your score, so refinancing with bad credit can still work when the rest of your finances are strong. Before you rule it out, it helps to know what lenders actually weigh in their decision.

What credit score do lenders look for when refinancing a car?

Most lenders sort applicants into broad credit tiers, and where you land shapes the offers you'll see. Generally, scores above 660 are considered prime, the low-to-mid 600s are near-prime, and anything under roughly 600 falls into subprime, the range usually labeled "bad credit."¹ Plenty of lenders still work with subprime borrowers, but the terms vary widely from one to the next.

Credit Score Range	Refinancing Outlook
720+	Strongest rates and widest options
660–719	Competitive offers available
600–659	Approvable, higher rates likely
Below 600	Possible, but expect limited offers

Refinancing a car with a 500 credit score is harder, but not out of the question. Some lenders that specialize in poor-credit auto refinancing will still review a 500 application, especially when other parts of your profile are strong. Knowing where your score falls helps you set realistic expectations, so it's worth learning how FICO scores are calculated before you apply.

What matters beyond your credit score

Your score opens the conversation, but it doesn't finish it. Lenders weigh several factors when reviewing a request to refinance an auto loan with bad credit, including:

• Payment history: A recent stretch of on-time payments signals you've gotten back on track, even if your score is still catching up.
• Loan-to-value ratio: This compares what you owe to what your car is worth. Owing less than the vehicle's value makes you a safer bet.
• Income and debt-to-income ratio: Steady income and manageable monthly obligations show you can comfortably handle the payment.
• Time since negative events: A late payment or collection from three years ago carries far less weight than one from last month.

Even with a low score, a borrower who has a strong recent payment history and real equity in the car may still qualify. And if you owe more than your vehicle is worth, it helps to understand the impact of negative equity on your options.

How to improve your approval odds before you apply

A little preparation goes a long way toward bad credit car refinancing success. Try these steps before you submit an application:

1. Pull your credit reports and correct errors: Mistakes are common, and fixing one inaccurate late payment can nudge your score upward.
2. Lower your credit utilization: Paying down card balances reduces how much of your available credit you're using, which lenders like to see.
3. Make every payment on time: A recent clean streak builds momentum and strengthens your application.
4. Gather your income documentation: Pay stubs, tax returns, and bank statements help a lender see your full financial picture.
5. Wait out very recent derogatory marks: Giving a fresh late payment or collection a few months to age can meaningfully change your offers.

You can also follow these steps to rebuild your credit over time. And if you're trying to refinance a repossessed car with bad credit, lenders will want to see that you've stabilized your finances since the repossession before extending new terms.

What rates should you expect with bad credit?

Borrowers with lower scores should expect higher annual percentage rates (APRs) than prime borrowers, because the lender is taking on more risk and prices that risk into the rate.² That's simply how lending works.

The good news is that when you shop around, multiple auto refinance inquiries made within a short window, usually 14 to 45 days, are typically treated as a single inquiry.³ This means that rate shopping won't tank your score. 

Many lenders also offer prequalification with a soft credit check, letting you compare real offers without committing or dinging your credit. Knowing when to refinance an auto loan often comes down to comparing those prequalified numbers side by side.

When refinancing makes sense, and when to wait

Even at a higher rate, refinancing can still be the right call in certain situations. It may make sense if it lowers your monthly payment, helps you remove a co-signer, or pulls you out of an existing loan with even worse terms. 

On the other hand, if your credit is climbing, and you're only months away from a meaningfully better tier, waiting to rebuild can save you far more over the life of the loan. A simple way to think about it: weigh what refinancing saves you today against what a stronger score could save you soon. 

For a deeper look at the reasons refinancing can pay off, it's worth reviewing your specific situation before deciding.

Where to find lenders that work with bad credit

Some lenders are simply more comfortable with imperfect credit than others. Credit unions, online lenders, and lenders that specialize in subprime auto financing tend to be the most flexible with borrowers who are rebuilding their credit. As you compare offers, look at the full cost, including the APR, term length, and any fees, rather than the monthly payment alone.

Instead of chasing a single bank name, focus on lenders that evaluate your complete profile. Your current lender can be a good option, but many won't refinance a loan they already hold, so casting a wider net usually serves you better.

Talk to a lender who reviews the whole picture

When you have bad credit, the difference between a "no" and a "yes" often comes down to whether a real person reviews your application or an automated system simply cuts you off at a number. At Lendward, you talk to actual people at every step of the process. There are no chatbots or algorithms making the call. Your dedicated account manager has prior lending experience, doesn't work on commission, and stays with you from start to finish.

If you're ready to see what's possible, start your auto refinancing application and let someone look at your full story, not just your score.

 

Sources

1. DeNicola, L. (2024, October 29). Subprime Auto Loan: Guide & Rates. https://www.experian.com/blogs/ask-experian/subprime-auto-loan/ 
2. DeNicola, L. (2025, August 28). Multiple inquiries when shopping for a car loan. https://www.experian.com/blogs/ask-experian/multiple-inquiries-when-shopping-for-an-car-loan/ 
3. myFICO. (2023, July 5). How to rate shop and minimize the impact to your FICO® scores. myFICO. https://www.myfico.com/credit-education/blog/rate-shop