Red Hot Tips Point: Bad Credit Refinance

Tuesday, October 20, 2009

Bad Credit Refinance

If you are looking to refinance but have bad credit, the only option available for you is bad credit refinance. Bad credit refinance is different from other refinance packages in the sense that you will pay a much higher interest rate when you get approval.

Why Bad Credit Refinance

By opting for bad credit refinance, you can consolidate bills and reduce your mortgage rate. If you have high balances on a number of high interest rate credit cards and car loans, bad credit refinance can help you in the repayment. You may not realize it, but a bad credit refinance loan with an interest rate of more than 10% is a much better proposition than paying over 10-20% percent on multiple credit cards. A bad credit refinance loan is also going to be spread over twenty years so you get plenty of flexibility in terms of monthly installment.

If you decided to get a mortgage right after filing for bankruptcy, your rate of interest on this loan is going to be very high. Once you improve your credit rating, you can get a new bad credit refinance loan at low interest rates. For example, if you are paying 14% interest at present, after improving your credit rating this figure can drop to 10 percent, reducing the monthly installment appreciably.

Lender Fees

When you take on bad credit refinance, you will need to pay some fee to the lender. You will find quite a bit of variation in fees from one lender to another. So, it is quite important that you shop around before accepting any offer. As your credit rating is poor, there is a strong possibility that lenders may not give you any discount. Try to convince lender by telling your plan of action with regard to repayment. Lenders normally set fees on the basis of your monthly source of income and credit rating.

Bad Credit Refinance with Debt Consolidation Loans

Debt consolidation loans give you an opportunity for bad credit refinance because it is not easy to get if you have not been able to pay monthly installments on time. To get a debt consolidation loan, you need to find a consolidation lender willing to give you a loan with easy terms and conditions. The loan provided will help you in getting rid of previous debt. That debt relief will go a long way in improving your credit score. With an improved credit score, you are not going to face any problem in future loan approval. Further, you are going to get new loans at low interest rates.

To get approval for debt consolidation loan, all you need to do is to provide all your financial details. It includes your monthly income, bank account details, credit score and the loans that you have taken out in the past. Your credit score is going to play a prominent part in the approval process. People with good credit score get approval straightaway. To improve your credit score, make sure that you are paying monthly installments on time. When you do this, there is a good chance that the lender will give you some sort of discount on interest rates.