Refinance Your Car Finance Deal

Refinancing a car loan is a great option for many different circumstances

When you bought your car on finance, the likelihood is that it's either a Personal Contract Purchase (PCP) or Hire Purchase (HP) finance agreement, likely lasting anywhere between 12-60 months.

With the ongoing cost of living crisis affecting us all, your circumstances may have changed, and it may no longer be possible to keep up with the monthly repayments.

Alternatively, you may be in a better financial position than when you took out your finance deal previously, or your credit score may have massively improved.

Do you have a car on finance and wish to refinance your deal? Sign up to Car Credible today to see how we could help you.

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Whatever your situation, did you know that you could refinance your car finance deal? It's a bit of a secret within the car finance industry, and lenders don't want consumers to know that it's an option for you.

Refinancing your deal could be the perfect option to help ease some of your financial worries or, on the flip side, pay off your deal months before the agreement ends. 

In this article, we'll take a deeper look at car refinancing and the many options available. By the end of this article, we guarantee you'll want to see your refinancing offers!

What is car refinancing?

Car refinancing is the process of taking out a new finance loan - typically with a different lender than the one you currently use - to pay off an existing car finance loan.

When you refinance, you'll settle your current loan with a one-off payment. That payment could be covered by your new lender or merged into your new loan, which will be repaid monthly.

Why do people refinance?

Individual circumstances change, and when you originally took out your finance loan - whether that was four years or four months ago - you may have been in a different position than you are now.

You may have had a poor credit score and were therefore offered a loan with a high APR, meaning your repayments are higher each month to take into account the interest.

However, since then, your credit score may have improved, and you may now be eligible for a lower APR, thus reducing the overall amount you will need to repay throughout your agreement.

The cost of living crisis has affected us all, and you may be feeling the pinch from the inflation rate increase and energy bill hikes. Therefore, you wish to reduce your monthly repayments to help you save some money.

You may have come into some money and wish to pay off your car finance earlier than agreed at the start of the deal, or you have reached the end of your PCP agreement and need help to pay the balloon payment.


Should I refinance my car?

Refinancing is an option available for everyone with a finance deal, and there are plenty of positives to refinancing. 

You could reduce your interest rate if your credit score has improved, or general interest rates are lower than when you took out finance; it could help save you a significant amount of money.

You may want to reduce your monthly payments because you are struggling to keep up with other bills. In this current climate, it's a common reason for many to refinance, and it could help save money.

If you've recently come into some money, whether by winning it yourself, inheritance, or a pay rise at work, for example, you could refinance and pay off your vehicle's loan sooner to own the car and avoid making any more loan repayments.

Refinance a PCP balloon payment

Another reason you may want to refinance your balloon payment is if you're coming to the end of your PCP finance deal and want to keep the car but can't afford to make the one-off payment required.

You could refinance, which would extend your balloon payment and break it down into manageable monthly chunks that you would continue to repay to reduce the overall balloon payment again in the future.

If you don't want to keep the car, you can hand it back to the lender and walk away without paying another penny, but this option may not be suitable for someone that needs a car but can't afford to buy or take out finance on another.

If you wanted another car but not the one you currently have, you could use any equity in your vehicle as a deposit on another car. It is one of the reasons why PCP finance is so popular, as you have flexibility and options.

Refinance a car with bad credit

If you want to refinance for any of the reasons mentioned above but currently have a poor credit score, there may still be options available.

Likewise, if you're in a negative equity position - this is when your car is worth less than the amount of finance you have left to pay on it due to depreciation.

Both circumstances are certainly a little more challenging to help refinance, but it's possible due to the different number of lenders that Car Credible works with alongside its partner brokers.

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How to refinance a car

If you have already signed up to Car Credible, you could log in to your dashboard and apply for finance. You just need to fill in some details and discover if you are eligible to refinance.

Whether you already have an account with us or not, you could visit our finance application page, where you can specify what you would like help with. It will help us understand how best to help you and find the best deal as quickly as possible.


Could refinancing affect my credit score?

In the short term your credit score may be affected as a lender will need to perform a hard search of your credit history. In the long run, though, your credit score should hopefully naturally improve as you make your monthly repayments.

What are the negatives of refinancing?

The positives far outweigh the negatives, but there are a few things to watch out for. You could end up paying additional lender fees and interest if you extend your loan as it will end up being longer than you initially applied for.