Soaring car prices and interest rates are making auto loan payments increasingly difficult for many Americans, especially those with bad credit. Subprime delinquency rates (payments at least 60 days overdue) were a record 6.9% in January 2026, according to Fitch Ratings.
Many borrowers are rushing to refinance, but if your credit isn’t in good shape, you might assume you’ll be locked out.
Everything is relative, says Simon Goodall, CEO of auto refinance marketplace Caribou.
“We see customers with some insane rates—above 30%," Goodall told CNBC Select. "Getting them a rate in the high teens can be a lifesaver. It may not seem like a good rate to you, but there are a lot of people who’ve been taken advantage of.”
Goodall acknowledges the odds of approval decline when your FICO Score is below 660, but he says no one should assume they're stuck with their current loan. Look at your complete financial picture, not just your three-digit score. How much are you carrying on your credit cards? How much are you paying in student loans each month?
A lender will look at your income, your debts and the value of your car to gauge whether you’re a good risk, Goodall said.
“If you’ve got a low score but you have strong income and a good loan-to-value ratio, you can get refinanced,” he added.
Know your car’s value
Most lenders cap loan amounts at 125% of a car’s value. If your car is worth $20,000 and your loan balance is $15,000, that low 75% loan-to-value ratio might get you approved, even if you have a 580 FICO Score.
Your car’s make, model, mileage and age are key factors in appraising its value. But extras can play a critical role, too, according to Goodall.
“The value of a car with a sunroof versus one without it can be the difference that makes a loan-to-value acceptable to a lender,” he said.
Cast a wide net
Lender requirements vary massively, so don't limit yourself to traditional banks.
Fintech marketplace Upstart matches applicants with lenders that accept credit scores as low as 510 and works with borrowers with insufficient credit history. Upstart can find refinancing for vehicles up to 13 years old or with 140,000 miles on the odometer.
Upstart Personal Loans
Annual percentage rate (APR)
6.20% - 35.99%
Loan amounts
$1,000 to $75,000
Terms
36 and 60 months
Credit needed
300 (but may also accept applicants with no credit history)
Origination fee
0% to 12% of the target amount
Early payoff penalty
No
Late fee
5% of the last amount due or $15, whichever is greater
Credit unions often use character-based reviews to look beyond credit scores, incorporating income, rent, utility payment history and other factors to determine risk. Loan officers may also consider extenuating circumstances.
PenFed is one of the largest credit unions in the U.S., and all you need to become a member is open a savings account with a minimum $5 deposit. PenFed offers competitive APRs for refinancing, with no document fees or origination fees.
PenFed Auto Loans
APR
Starting at 4.19%
Loan types
New vehicles, used vehicles, refinancing
Loan amounts
Up to $150,000
Terms
36 to 84 months
Credit score needed
Not specified
Early payoff penalty
None
Late fee
20% of the overdue amount, up to $25
Terms apply.
Federally Insured by NCUA. To receive any advertised product from PenFed, you must first become a member of the PenFed Credit Union. Rates and offers current as of October 21, 2025, and are subject to change. Actual APR will be determined at the time of disbursement and will be based on application and credit information. Rates quoted assume excellent borrower credit history. Not all applicants will qualify for the lowest rate. Rate depends on term. New vehicles are where you are the original owner and the vehicle is a current 2024 model year or newer and has less than 7501 miles.
Get a co-signer
A partner, friend or family member who is willing to co-sign and has good credit can have a big impact on your refinancing options. Ask the lender if they base their terms on the average of your two scores or give more weight to the higher one.
And, remember, the co-signer is on the hook for the debt, too. So be mindful of the potential strain on your relationship.
Consider a longer term
Even if you don’t qualify for a lower rate, stretching the payments over a wider time frame can help if you’re on a budget. And a longer term means lower monthly payments, which can reassure a lender about your ability to repay the loan.
If you have a 60-month $20,000 loan with a 14% interest rate, your monthly payments would be $466. Refinancing to an 84-month loan at the same rate drops that to $375, freeing up an extra $91 each month.
Keep in mind you are paying more in the long run, but if making ends meet from month to month is your priority, it may be worth it.
“With vehicles lasting longer, 84-month loans are not as bad as they were a few years ago,” Goodall said. “At the end of the loan, you’re still going to have a vehicle that’s worth something.”
Improve your credit
Depending on your credit history, you may be able to raise your score fairly quickly. According to Experian, if you consistently pay bills on time and reduce your credit card balances to below 30% of their limit, you can see improvements in as little as 30-45 days.
Larger increases can take three to six months, but even boosting your score by just 20 points can save you hundreds of dollars. A 620 FICO Score can nab a rate of 9.43% on a 48-month refinance, according to Caribou’s latest data. But a 640 could be approved for 6.49%.On a $20,000 loan, that’s a difference of $324 or $27 a month.
Crunch the numbers to make sure raising your credit score is worth the extra payments you may face.
“If you can lower your payment today, why wait?” Goodall said.
Contact your lender
Shopping around is imperative if car payments are pushing your budget to the limit. But your current lender should be your first stop. They already have your financial details and payment history on file and may be willing to waive some fees.
If a refinance isn't in the cards, your lender may be open to a short-term deferment or even a loan modification — especially if you can demonstrate financial hardship.
Your top goal should be to avoid missing a payment, which can damage your credit and make refinancing even harder.
"No lender wants to refinance somebody who's already stopped paying," Goodall said.
Auto refinancing FAQs
How does refinancing an auto loan work?
Refinancing an auto loan involves substituting your existing financing with a new loan, either with your current lender or a new one. While refinancing can secure you a lower rate or a different term length, there are fees associated with the process that can eat into any savings. Those charges include an origination fee (which can be anywhere from $100 to $1000), as well as a title transfer fee, registration fee and a prepayment penalty from your original lender for closing the loan out ahead of schedule.
When can I refinance my auto loan?
You can't get a new loan until your original lender receives the car's title from the manufacturer or previous owner, which can take up to three months. If you're concerned about your credit, six months is long enough for your credit score to recover from the original lender's hard inquiry.
Does refinancing my auto loan hurt my credit?
Any hard inquiry by a lender will result in a small, temporary drop in your credit score, usually about five points. If you apply for multiple loans in a small window (between four and six weeks), they will only count as a single inquiry.
Is it worth refinancing my auto loan?
Everyone's financial situation is different, but refinancing can be worth it if you can secure a lower rate or more budget-friendly monthly payments. This is particularly true if your credit score has improved at least 50 points since you took out the original loan or if you're able to take advantage of a lower overall interest rate environment. If you have only a few payments left or your car is worth less than you owe on it, refinancing may not be a smart option.
Meet the experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on years of relevant training and experience. For this article, we spoke with Simon Goodall, CEO of auto refinance marketplace Caribou.
Previously, Simon was global chief commercial officer for Groupon and a senior vice president at World Travel Holdings. He earned a Bachelor of Science from Northwestern University and an MBA from Northwestern's Kellogg School of Management.
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