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I got a loan but the interest rate is pretty high...I realize this is the price i pay for bad credit. But after making steady payments for a year or more, is it possible to refinance this? There is no prepayment penalty with my loan.
How does this work at that point in time?
The short answer to your question is yes. There are things you need to work on in the next year however to make it possible. First and foremost, raise your credit score to a level that would make it beneficial to refinance (no use refinancing if you can't get a lower rate). Second, and equally as crucial in my mind, keep your loan to value within reason! Sure you can boost your credit score 100pts in a year, that's awesome. No-one will refi your loan if it's 200% LTV though. At-least not on terms that would help your position any.
So with that said, how bad is it?
What does LTV mean in layman's terms? The value of the car?
My rate is 16%, which i know is bad but my score was low due to know revolving credit, which is a step i'm going to move forward with soon
LTV means Loan To Value. Basically it is the value of the vehicle as it compares to how much you owe on it. So if you owe 10k on your car and your car is worth 10k then your LTV is 100%. On the same car if you owe 11k your LTV is 110% etc.
Don't kick yourself too much over your rate, there are people out there paying more I assure you. All you need to do is set your goals and see at what point they will be attainable. A year seems like a long time now but it will fly by believe me. Have you done the amortization calculator with your loan terms yet? It's pretty much the same as what is in your payment book, except in an easy to read table format and allows for additional monthly payments and yearly lump sum payments. Have you done any research for an idea of what your car will be worth in 1 to 2 years?