Credit problems have a way of hanging around and continuing to cost you more and more. With a little diligence, however, you can use good payment habits along with an auto loan refinance to begin the recovery process.

Bad luck can derail anyone's progress in life. Look at the Los Angeles Lakers-after a promising start to the 2006-2007 season, a string of injuries led to a completely marginal record at the season's end, despite the presence of Kobe Bryant, the league's best player. Don't tear yourself up over past credit problems-just look for ways to start rebuilding and, like the Lakers, rebounding.

When things go sour


Having a history of poor credit management can get expensive. When you need to borrow money for a home, a car, or perhaps even a new suit, prospective lenders want to know how you've handled your credit accounts in the past. If your credit management has been less than stellar, your interest rate, for obvious reasons, goes up. As a result, you end up paying more for that item than everybody else, which works against you in your efforts to rebuild your credit profile.

The only way to turn things around is to establish a history of on-time payments. If you can make your minimum scheduled debt payments for one year or more, you might be able to reduce your costs going forward with an auto loan refinance.

Turning things around


Refinancing your auto loan to a lower interest rate will reduce your payment and loosen up your monthly cash flow. Lowering that auto payment by just a small amount can be enormously helpful as you dig yourself out from under excessive debt. You can put that extra cash towards higher interest credit card debt. Or you can continue making the higher payment on your auto loan, so that the loan balance goes down even faster.

You can find a refinance lender for your auto loan online. Just be on the lookout for so-called "bad credit lenders." While there are some reputable companies out there, there are also a few predatory lenders that might not have your personal interests in mind. Your best strategy will be to shop around and interview several lenders. Collect a handful of quotes to be sure that you're getting a good deal.

Once you close your auto loan refinance, you can start planning for further credit improvement actions. If you own a home and are paying a high rate on your mortgage, a refinance might help you save a significant amount of money-money that you can put towards your savings or paying off more debt.

When you're disciplined about making your payments on time, you create opportunities to lower your debt costs through refinancing. Whether you refinance your car, your house, or both, consider each refinance action a mini fresh start towards a more stable financial future. That's something to be excited about. As for the future of the Lakers, well, that's another L.A. story.

Published on January 28, 2014