For millions of Americans with fair or subprime credit, car payments are a constant source of stress. With interest rates still elevated and inflation squeezing budgets, even a small reduction in monthly payments can mean the difference between making ends meet and falling behind. But here’s the good news: you don’t need perfect credit to refinance your car loan and save hundreds of dollars a year. In fact, 2025 data shows that even borrowers with credit scores as low as 500 are successfully lowering their payments by $100–$150 per month—sometimes more.

Why Fair and Subprime Borrowers Are Refinancing Now

According to a recent LendingTree study, the average borrower with a credit score below 600 saved $142 per month by refinancing their auto loan in 2025. For those with scores in the 500–579 range, savings were even more dramatic—up to $175 per month in some cases. These savings are possible because lenders are now offering subprime refinancing at rates that are 2–4 percentage points lower than what was available just two years ago.

“We’re seeing a real shift in the market,” says auto finance expert Sarah Lin. “Lenders are competing for subprime borrowers, and that’s driving down rates. If you have a car loan with a rate above 10%, you should absolutely shop around.”

Who’s Getting Approved in 2025?

Current lending standards are more flexible than ever for fair and subprime borrowers. Here’s what you need to know:

• Minimum credit score: Some lenders, like OpenRoad, Capital One, and RefiJet, are approving refinances for borrowers with scores as low as 500.
• Loan-to-value (LTV) ratio: Most lenders require an LTV below 110%, but some, like Digital Federal Credit Union (DCU), will go up to 130% for qualified borrowers.
• Income and payment history: Lenders are placing more weight on steady income and a history of on-time payments, not just credit score.

How to Shop for a Refinance That Actually Lowers Your Payment

Refinancing with fair or subprime credit requires a strategic approach. Here’s how to do it right:

Step 1: Check Your Credit Score and Car Value

Before you apply, know your credit score and your car’s current value. Use free tools like LendingTree Spring or Credit Karma to check your score. For your car’s value, use Kelley Blue Book or Edmunds. If your car is worth more than you owe (positive equity), you’ll have more options.

Step 2: Compare Lenders and Rates

Don’t settle for the first offer. Shop around using online platforms that let you prequalify without hurting your credit. Here are some top options for fair and subprime borrowers in 2025:

• Caribou: Specializes in high-payment, high-interest loans. Customers save an average of $151/month.
• Ally: Offers prequalification with no credit impact. Competitive rates for subprime borrowers.
• DCU (Digital Federal Credit Union): Allows co-borrowers, flexible terms up to 84 months, and refinances up to 130% of car value.
• Lending Club: Average savings over $2,400 per loan, with rates starting at 5.49% for borrowers with scores above 560.
• Chase Auto: Requires at least 90 days of current financing and 12 months remaining on your loan, but offers competitive rates for those who qualify.

Step 3: Watch Out for Red Flags

Not all refinance offers are created equal. Here are some red flags that could wipe out your savings:

• Prepayment penalties: Some lenders charge fees if you pay off your loan early. Always check for these.
• Extended loan terms: Stretching your loan to 72 or 84 months might lower your monthly payment, but you’ll pay more in interest over time.
• Hidden fees: Watch for origination fees, processing fees, or other charges that aren’t clearly disclosed.
• High APRs: If your new rate is only slightly lower than your current rate, the savings may not be worth it.

Real-World Example: How John Saved $175/Month

John, a borrower with a 500 credit score, had a car loan with an 18% APR and weekly payments. After refinancing through Caribou, he lowered his APR to 10.5% and switched to monthly payments. His monthly payment dropped from $420 to $245—a savings of $175 per month. “It’s been a game-changer,” John says. “I can finally breathe a little easier.”

Expert Tips for Maximizing Your Savings

• Add a cosigner: If you have a friend or family member with good credit, adding them as a cosigner can significantly lower your rate.
• Don’t refinance if your score has dropped: If your credit score is lower than when you got your original loan, you’re unlikely to get a better deal.
• Consider a shorter loan term: If you can afford it, a shorter term will save you money on interest in the long run.
• Communicate with your lender: If you’re struggling to make payments, talk to your lender before you fall behind. They may offer hardship programs or other options.

Take Action Now—Your Payment Could Be Lower Next Month

Refinancing your car loan with fair or subprime credit is no longer a pipe dream. With the right approach, you can save hundreds of dollars a year and reduce your monthly payment stress. Start by checking your credit score and car value, then shop around for the best rates. Don’t let a high payment hold you back—take control of your finances today.