With the crumbling economy showing no signs of recovery, many debtors are unable to keep pace with their finances. Most banks are shying away from lending money. They would prefer lending money to those with good credit record, rather than lending them to those with bothersome credit report.
Most reputed national lenders would want to stay afloat by lending to good borrowers. However, there still is a huge market for debtors with bad credit because they form a substantial segment of those looking for new loans. Admits the recession, not many people would want to borrow to buy homes or cars. This is why bad debtors are such attractive bait for lenders already engaged in a fierce competition with each other. A bad creditor is a definite risk, but lenders know that they can repossess the car if the debtor defaults again.
Capital-One, Wells Fargo, Citifinancial Auto Finance and Pentagon Federal Credit Union, still manage to keep faith in defaulters and refinance their loans.
Those with bad credit can ask the new lender to simply pay off the balance to the old lender and negotiate refinancing options. Lenders who are hesitant may demand the presence of a co-signor with a good credit standing. This human element of collateral actually does wonders to renew faith.
Buyers these days may not consider refinancing a car as it is a short term loan as compared to a home loan, however with the recent upheaval in the economy, interest rates can fluctuate wildly. It’s not just the borrowers who have to watch out; lenders have a lot to lose too. In such times, it actually may reverse the situation by making the lenders scout around, to bail out buyers with a bad credit.
With much of the paperwork already eliminated with the online loan application procedure, this has not only simplified and streamlined the refinancing process, but also helped cut costs for most lenders out there in the market.
Refinancing an auto loan is a good thing because of reduced interest rates and extended loan term which allows monthly expenditure to be allotted to other needs. Moreover, the positive impact it makes on the credit standing is undeniable.
Having said that, it is important to say that buyers may be better off, just trying to pay the principal amount completely to the old lender, if they can arrange for money from their family members or some other reliable source. This is because a vehicle is a depreciating asset unlike a house. No point paying $25,000 for a car whose value will be at $10,000 after the loan is paid off.
If refinancing does not work out with those unfortunate enough to have a bad credit, they can simply ask the old lender to lower the interest rates or extend the loan term while maintaining the same interest rate. Although this slows down payments, they may agree just to avoid the hassles of repossession.