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When you're in the middle of a personal injury claim, you might be surprised to learn that it could impact your auto loan refinancing. This can be all the more frustrating as you try to recover from painful injuries and get back to normal after your accident.

Understanding the link between your claim and refinancing can help you make the right decisions for your future.

the connection between personal injury claims and auto loan refinancing

How Can a Personal Injury Claim Affect Your Car Loan Refinancing?

There are several ways that a personal injury claim can cause issues for refinancing your auto loan. It could affect your credit score, force you into a negative equity situation on your car, and even make refinancing impossible with a higher loan-to-value (LTV) ratio.

Take a deeper look at the ways you may experience issues when attempting to refinance:

Impacts on Your Credit Score

For someone who is making payments on a personal injury claim, an impacted credit score is a huge concern. These payments are likely to appear on your credit report, and when they do, they could have a negative effect on your credit score. Since your credit score is one of the key metrics used by lenders to determine whether or not to refinance someone, it may result in a rejection of your request to refinance.

Creating Negative Equity

If someone else caused your accident, you'll soon discover that one of the residual consequences of their negligence is that the value of your vehicle will be reduced. This is particularly true if you incurred significant damages and your insurance settlement isn't enough to fully satisfy the remaining balance of the loan.

When that happens, you will have negative equity on your vehicle or owe more than your vehicle is worth. Refinancing in this scenario is often a huge challenge as lenders tend to view it as a high-risk scenario.

Loan-to-Value (LTV) Ratio

The LTV ratio takes the amount you still owe on your loan and compares it to the actual value of your vehicle. If your LTV is high because of negative equity, you'll wind up with higher interest rates, if you're even approved for refinancing. Often, lenders will use this ratio to deny a refinancing request. MyAutoLoan helps you find the perfect auto loan with competitive rates and fast approval.

Your Payment History

For many car accident victims, especially those with serious injuries, it's easy to miss a car payment or two while trying to pick up the pieces in the aftermath. Regardless of why you've missed payments, this can negatively impact your standing with the lender and may result in a rejection for refinancing.

Additionally, it's important to note that even if you are granted a settlement from your injury claim, lenders may still hesitate to refinance your vehicle. This is largely due to holding the accident against you. They will consider you a high-risk borrower with financial instability.

Steps You Can Take to Refinance Your Vehicle Amid Your Personal Injury Claim

After an auto accident, especially one that you did not cause, it may not seem fair that you're being punished for the negligent actions of another person. If you're finding it difficult to refinance your vehicle, you can take the following steps:

Settle Your Personal Injury Claim First

If you are expecting to receive a settlement from your personal injury claim, it is always best to wait until you officially have it in your account. This tends to prevent issues from arising with lenders when it comes to refinancing your auto loan.

Work on Boosting Your Credit Score

Getting your credit score in good standing is a smart way to improve your situation. Put your focus on making all payments on time for each of your bills. Once your score goes up, you can start applying to refinance your vehicle.

Look at Loan Consolidation as a Potential Option

Car accidents tend to cause good people to sink into debt. It's especially upsetting when you weren't the one to cause the accident, but a mountain of expenses caused by a careless driver can impact your financial standing. When you are saddled with multiple debts, it may be worth the effort to consolidate them into a single loan. It will be easier to pay it off and help you make progress raising your credit score.

Compare Between Other Lenders

Even when you take all these steps, your current lender may not be providing you with the best interest rates or terms. Some lenders can be more flexible in situations where someone has experienced a car accident. You should inquire with a few of them and then you'll have options to choose from.

Consult a Personal Injury Attorney

If you were a victim in a car accident, trying to handle the insurance claims process, organize your medical bills, and move forward from this traumatic event can be a huge challenge. When you have serious injuries thrown into the mix, it may be best to delegate all these tasks to a personal injury lawyer who can help you in different ways.

Personal injury attorneys are capable of calculating the full extent of your damages, including those related to your vehicle. They can negotiate with the insurer on your behalf, and when that doesn't provide the desired results, they can move the case through the civil court system.

If the value of your vehicle is a concern and you're worried about refinancing, a personal injury lawyer will be able to provide you with legal advice to that end. They will help you with all of your options in your specific situation, allowing you to make the best possible decision.

There are other reasons to choose an attorney, such as to avoid being partially blamed and losing the compensation you deserve. Ultimately, when you speak with someone who has a better understanding of state laws, regulations, and how insurers and lenders work, you'll have an advocate to help you through this difficult time in your life.


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