How to Fix Bad Car Loans

You can get stuck with a bad car loan for several reasons. The most common is having a bad credit history: Lenders might not have been willing to extend credit unless you paid a high interest rate. But you could have gotten bad terms even if you have a good credit score. Either way, you should be able to fix your bad car loan.

Instructions

1

Check your credit report to make sure it is in the best possible shape, advises Carbuyingtips.com. If you got a bad car loan because of credit problems, you will need to build up a history of on-time payments for at least six months. Even if you had good credit, it's still smart to check your report for any possible mistakes. You are entitled to a free copy from all three bureaus (Equifax, Experian and Transunion) annually. Dispute any mistakes. You can get a free copy of all three reports from www.annualcreditreport.com

2

Contact the financial institutions where you currently have accounts. A bank or credit union is often more willing to give you a car loan if you have established a long-term business relationship. They are also more likely to give you favorable terms. Carbuyingtips.com says credit unions tend to give the lowest interest rates. Philip Reed of the Edmunds auto research website says you also should search online through sites like Bankrate.com.

3

Get the exact payoff amount from the current lender once you find a financial institution that agrees to give you a better car loan. Ask how long you have to pay that amount before it goes up. Typically it will be good until your next car payment. Ask if there are any other fees or early payoff penalties. These are often part of a bad car loan; if they are in your contract, you will have to pay them to get free off the loan.

4

Get a check from your new lender that covers the loan payoff and any fees. Make a copy of it before you send it to the current loan company. Make the payoff in person if possible so you can get an immediate receipt. Otherwise, mail it certified so you can prove it was delivered by the correct date to avoid paying a higher amount.