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Refinancing a Loan With Bad Credit

Qualifying for a refinance loan with bad credit is fairly easy, though of course be ready to shell out higher fees and expect higher interest rates (as opposed to if you had good credit). It’s made easier on banks to help you refinance because they know just by looking at your credit score they will be able to charge you higher fees and interest rates, simply because they know you have no other option.

These days, getting a refinance loan is better for the average person because of the numerous ’subprime’ lenders that are out there today. These subprime lenders are wanting to give you a better offer because they need to effectively compete with all the other major banks and lenders already established. Furthermore, the established credit organizations are trying to keep up with these subprime lenders to some degree, because they don’t want to lose their clients either.

So why refinance an existing loan? There are two main reasons:

Consolidation of your debts and bills is a common reason for many borrowers. This is because if you refinance you can expect to lower your interest rates, especially if your credit has improved since the last time you’ve been accepted for a loan. Even with bad credit you might find yourself an interest rate of say, 12% if you choose to refinance an existing loan, which is a significant improvement from a 20% interest rate that you may have on your credit cards.

Also, the refinance is likely to have a longer life span, it could be that this loan needs to be payed back over 30 years. This will decrease the amount you have to pay on your monthly payments, in addition to your interest rates being lowered, and thus you are able to pay your way out of debt much faster.
You can also choose to refinance your existing mortgage to get a better rate of interest. In the worst case scenario of having filed for bankruptcy, you will likely have a terrible interest rate on your mortgage and could get a much better one by refinancing after a couple of years. Having not claimed bankruptcy, if you’ve improved upon your credit score since your last mortgage, it might be a smart idea to refinance the mortgage to get that lower interest rate.

Also keep in mind that if your refinanced mortgage has a fixed interest rate, you can always choose to refinance a second time (as many times as you’d like, actually) if you’ve improved your credit again over the span of a few years. Respect your budget and make sure your bills are paid consistently and on time; a refinanced loan will make this even easier for you to build back your credit and make all this possible.

Have bad credit? Need help in working through your finances? The Bad Credit Refinance Guide offers many options and great tips to assist your financial well being!

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