You can refinance a car loan with a 500 credit score, but only a narrow set of subprime lenders will consider you, and the rate you’re offered will be high. Average used-car refinance rates in the deep subprime tier (scores 300–500) run around 21.6%, according to Q1 2025 Experian data.1Experian. What Does Subprime Mean? That’s still an improvement worth chasing if your current loan came from a buy-here-pay-here dealer at 24% or more. If your existing rate is already in the high teens, the math often doesn’t work.
What Rate You Should Actually Expect
Lenders price auto loans on credit score and loan-to-value ratio, and a 500 score puts you in the tier they price for maximum perceived risk. Average used-car rates by credit band look roughly like this:
- Deep subprime (300–500): about 21.6%
- Subprime (501–600): about 19.0%
- Near prime (601–660): about 13.7%
New-car rates for the subprime tier run lower, around 13.3%, but most borrowers refinancing at a 500 score are in used vehicles. Run the numbers honestly before you apply. On a $15,000 balance, moving from 24% to 21% produces real savings over the remaining term. Moving from 19% to 18% probably won’t cover the fees.
Which Lenders Will Consider a 500 Score
Traditional banks generally won’t approve borrowers below about 580, so you’re shopping in a narrower slice of the market.
Credit unions are usually the best first stop. Their nonprofit structure gives them room to underwrite more flexibly than banks, and many run credit-builder or refinance programs aimed at members stuck in high-rate loans. Membership eligibility is typically based on where you live or work and is easy to meet.
Online lending marketplaces let you compare offers from several subprime-focused lenders at once. They start with a soft credit pull to match you with potential offers, so browsing doesn’t affect your score. The hard inquiry only happens when you formally apply with a specific lender.
Subprime specialty lenders exist for exactly this credit tier. They lean more heavily on your current income and job stability than on past credit damage. Their rates reflect the risk they’re taking, and some tack on processing fees of several hundred dollars.
Your Debt-to-Income Ratio Matters Almost as Much
Most subprime auto lenders cap acceptable DTI somewhere between 45% and 50%. Add every monthly debt payment, including the projected new car payment, and divide by your gross monthly income. If you land above 50%, most lenders will decline regardless of anything else on the application.
Does Your Car and Loan Even Qualify?
The vehicle is the collateral, so lenders want to be sure it holds enough value across the loan term. Requirements vary, but most subprime refinance lenders look for:
- Vehicle less than 8 to 10 years old
- Under 100,000 to 150,000 miles
- Loan-to-value ratio no higher than 125% of the car’s current wholesale value
- A remaining balance of at least $3,000 to $7,500 (smaller loans don’t generate enough interest to interest a lender)
- A clean title (salvage, rebuilt, and other branded titles are almost universally excluded)
- Personal use only, not rideshare, delivery, or other commercial activity
The LTV cap is where most applicants get stuck. If you owe $15,000 on a car currently worth $10,000, that’s a 150% LTV, and nearly every lender will reject it. Either the balance has to come down or the gap has to close before refinancing becomes realistic.
Negative Equity Is the Common Blocker
Owing more than the car is worth is common at this credit level, because the original loan often included dealer markups, rolled-in add-ons, or a long term that outran depreciation. The FTC recommends making principal-only payments to bring the balance down before pursuing new financing.2Federal Trade Commission. Auto Trade-Ins and Negative Equity: When You Owe More than Your Car is Worth A few hundred dollars applied directly to principal can shift your LTV enough to cross the 125% threshold.
One thing to know: any gap insurance you carry is tied to the current loan, not the vehicle. Refinancing cancels it. You’ll need new coverage through the new lender or you’ll go uncovered during the transition.
Using a Co-Signer
A co-signer with strong credit is one of the most effective ways to get approved at a better rate. When someone with a 700-plus score signs on, the lender evaluates both credit profiles together, and the perceived risk drops sharply.
The trade-off falls on the co-signer. Federal rules require lenders to notify co-signers of their full liability before signing, and that liability is real.3eCFR. 16 CFR 444.3 – Unfair or Deceptive Cosigner Practices The co-signer is legally on the hook for the entire debt if you stop paying. Every payment, on time or late, hits both credit reports. A single 30-day late damages both scores.
Co-signers can’t remove themselves from an active loan, and you can’t remove them either. The only exits are paying the loan off or refinancing again into your name alone. If you make on-time payments for a year or two, your score may climb enough to qualify for a solo refinance and release the co-signer that way.
Documents to Have Ready
Subprime lenders are unforgiving about incomplete applications, and a mismatch discovered in underwriting can trigger an immediate decline. Have all of this together before you start:
- VIN and current odometer reading
- Current lienholder name, account number, and payoff amount
- The last 30 days of pay stubs, or two years of federal tax returns if you’re self-employed
- Proof of residence (utility bill, bank statement, or lease)
- Valid driver’s license or state ID
- Current auto insurance declaration page
One timing check before you apply: your current loan’s title and registration need to be fully processed, which takes 60 to 90 days after the original purchase. Apply too early and there’s no clean title for the new lender to attach a lien to.
Shop the Rate Without Wrecking Your Score
Borrowers at this credit level often apply to one lender, get a bad answer, and then wait weeks or months before trying again out of fear of more score damage. That’s the wrong move. Credit scoring models give you a shopping window: under FICO 8 and earlier, all auto loan inquiries within 14 days count as a single hard pull, and under newer FICO models the window is 45 days.4Bankrate. How Credit Inquiries Affect Your Credit Score
So apply to the credit union, the online marketplace, and the subprime specialist within the same two-week stretch. Your score takes one small hit instead of three, and you walk out with multiple offers to compare.
Fees That Can Erase the Savings
A lower rate is meaningless if fees eat the difference. Watch for four costs.
Processing and origination fees vary widely. Some subprime refinance companies charge $400 to $500; others charge nothing. Ask for the total cost of the loan including fees, and compare the all-in cost, not just the advertised rate.
Prepayment penalties on your current loan are less common with auto loans than with mortgages, but they aren’t prohibited by federal law. Read your existing contract before you start. An early-payoff charge can wipe out the rate savings.
Title transfer fees, charged by your state to record the new lienholder, run roughly $15 to $165 depending on where you live.
Gap insurance replacement is the fee borrowers most often overlook. If you carry gap coverage now, refinancing cancels it. You may be entitled to a prorated refund on the old policy, but new coverage through the refinancing lender is a separate cost.
All auto lenders must give you standardized Truth in Lending Act disclosures showing the APR, total finance charges, and total amount you’ll pay over the life of the loan.5Consumer Financial Protection Bureau. What Is a Truth-in-Lending Disclosure for an Auto Loan? Use those disclosures to compare lenders on real cost.
When Refinancing Is the Wrong Move
Refinancing isn’t automatically a win at a 500 score. Three situations where the math turns against you:
You’re near the end of your loan. With 12 months or fewer left, most of your remaining payments are principal, not interest. Refinancing restarts the amortization clock and can raise your total interest paid even at a lower rate.
The new term is much longer than what’s left. Stretching a 36-month remaining balance into a 72-month loan drops the monthly payment, which feels good. On a $15,000 balance at 21%, the extra three years of interest adds thousands to the total. A longer term also pushes you deeper into negative equity as the car depreciates faster than you pay it down.
Your LTV is well above 125%. If the only path to approval is rolling fees and negative equity into a new loan, you’re compounding the problem. Paying down principal on the existing loan for a few months is almost always the better move.
Consider Waiting a Few Months
Even a modest score improvement changes your pricing. Moving from deep subprime into the 501–600 tier is worth roughly 2 to 3 percentage points of rate reduction, which on a $15,000 loan over 48 months saves well over $1,000 in total interest. If your refinance isn’t urgent, spending a few months raising your score is often the highest-return move available.
The fastest levers at this level are getting credit card utilization below 30% of the limit (which can show up within one billing cycle) and making every payment on time on every account. Some newer scoring models treat paid collections more leniently than unpaid ones. Building from 500 to 600 typically takes six months to a year of consistent on-time payments, though it depends on what’s dragging your score down. Every point matters when you’re near the boundary between pricing tiers.