Crazy Interest – Auto Refinance Bad Credit

Suffering from bad credit is frustrating and best and embarrassing at worst. It makes it nearly impossible to buy anything without paying anything on time without adding hundreds to thousands of dollars extra to the cost. When you’re in trouble financially, enough to create bad credit, the last problem you need is to add an auto refinance with bad credit.

Bad credit auto refinance loans are a bad idea for several reasons. Firstly, when doing any kid of refinancing it’s always best to wait until credit scores are very high. Secondly, the terms of auto refinance for bad credit are terrible.

Auto refinance for people with bad credit is riskier than almost any other type of loans, including credit cards and unsecured loans. Because bad credit usually signifies late payments or defaulted loans, an auto loan will usually require a 20-50% down payment. The rest of the loan is at such a high rate of interest that it’s almost like putting the entire loan on a credit card. Worse, it’s actually like putting it on a credit card with poor credit. Interest rates of 20%-30% aren’t unheard of for auto refinance for bad credit. Of course, if you’re already locked in a loan with high interest rate and a refinance will lower the interest, it may sound like a good idea to refinance. However, a better idea is applying for an auto refinance after you’ve improved your credit.

What You Should Know About Improving Your Credit

Lenders make decisions about credit on a number of factors. Your debt to income ratio is a huge part. This is your monthly debt divided by your monthly income in percentage; 36% or less = good credit and higher than that is poor credit risk. The number of years you’ve been at your job and in your home is another part. Your past credit history and the amount of open credit are also factors which are considered. There are different strategies for rebuilding your credit, depending on what your problems.

If you have a higher percentage of debt to income ratio, the best way to repair this problem is to reduce your debt or to increase your income. Remember that the ideal credit situation is 28%. To improve your credit you’ll want to get your DTI down to at least 36%.

If your credit rating suffers because you have a poor history with repayment on debts, the best option is to get a credit card and make monthly payments on time. If you are unable to qualify for an unsecured card, a secured card will do perfectly. A secured card is backed by a deposit you make to the lender. They will issue a credit card based on the amount of the deposit (or a percentage of it). Make the payments on time and, if possible, in full every month. In twelve months you should have improved your credit.

While you cannot do anything about the time you’re in your home and job, you can raise your score through the methods from above.

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