How to Refinance a Car Loan with Bad Credit: Get a Better Deal

a woman wondering how to get a better deal when refinancing a car loan with bad credit

Having bad credit doesn’t mean you’re stuck with your current car loan forever. If you’re paying a high interest rate or if your financial situation has improved, you might be able to refinance your car loan — even with bad credit. Refinancing can help you secure a better deal, lower your repayments, or reduce the overall cost of your loan.

In this guide, we’ll walk you through how to refinance a car loan with bad credit, what to watch out for, and how to give yourself the best chance of approval.


What Is Car Loan Refinancing?

Car loan refinancing means replacing your existing car loan with a new one, ideally with better terms. The new loan pays off your current loan, and you start making repayments under the new agreement.

For borrowers with bad credit, refinancing can offer the chance to:

  • Lower your interest rate

  • Reduce monthly repayments

  • Extend your loan term to make repayments more manageable

  • Switch to a lender offering better service or fewer fees


Can You Refinance a Car Loan with Bad Credit?

Yes, you can — but it may be a little more challenging. Some lenders specialise in working with borrowers who have lower credit scores. While your options may be more limited, and you might not secure the lowest interest rates, refinancing can still save you money if your original loan had very high costs.


Steps to Refinance Your Car Loan with Bad Credit

1. Check Your Current Loan Details

Start by understanding your existing loan:

  • What is your current interest rate?

  • How much do you owe?

  • Are there any early exit or break fees?

Knowing these details will help you compare offers and calculate whether refinancing is worthwhile.


2. Review Your Credit Report

Before applying, check your credit score with agencies like Equifax or Experian. Look for any errors or old debts that could be affecting your score. Correcting mistakes can improve your chances of getting a better deal.


3. Work on Improving Your Financial Profile

Even small improvements can make a big difference. Focus on:

  • Paying off outstanding debts where possible

  • Making regular, on-time payments for current loans and bills

  • Avoiding applying for multiple loans at once

Showing stability and reliability boosts your chances of getting a better refinancing offer.


4. Get an Updated Car Valuation

The value of your car plays a big role in refinancing approval. Lenders typically prefer the car to be worth more than the outstanding loan balance. A professional valuation or even researching similar car models online can give you a good estimate.


5. Compare Lenders Carefully

Not all lenders treat bad credit applicants the same way. Compare lenders who offer bad credit car refinancing, and consider:

  • Interest rates

  • Fees and charges

  • Loan terms

  • Flexibility for extra repayments

Tip: A car loan broker like Naked Loans can help you compare multiple options quickly and find the best lender for your situation.


6. Get Pre-Approval if Possible

Some lenders offer pre-approval, giving you a clear idea of how much you can borrow and at what rate before you commit. This can make the refinancing process smoother and help you avoid unnecessary credit checks.


7. Apply for Refinancing

Once you’ve found the right lender, gather your paperwork:

  • Proof of identity

  • Proof of income (recent payslips or bank statements)

  • Details of your existing car loan

  • Car registration and insurance documents

Submit your application and wait for approval. If successful, the new lender will pay out your existing loan, and you’ll start making repayments under the new terms.


Things to Watch Out For When Refinancing with Bad Credit

  • Early Exit Fees – Your current loan might charge a fee if you pay it out early.

  • Application Fees – Some lenders charge upfront fees for setting up a new loan.

  • Longer Loan Terms – Extending your loan term reduces repayments but increases the total interest paid.

  • Higher Overall Costs – Always check the total cost of the new loan, not just the monthly repayment.

Get a Better Deal with Naked Loans

Refinancing a car loan with bad credit is possible and can lead to real savings if done carefully. By understanding your current loan, improving your financial profile, and working with the right lender, you can secure a better deal and enjoy more affordable car ownership.

At Naked Loans, we specialise in helping borrowers with bad credit refinance their car loans. Our team compares multiple lenders, negotiates better terms, and makes the whole process easy and stress-free.

Contact Naked Loans today and let us help you refinance your car loan and get a better deal!


Mitch Hills