Bad credit refinance can save you a lot of money. Paying a refinance loan at interest rate of 13% is still better than paying 22% on several high balance credit cards. Since the loan is spread out over 30 years your monthly loan payment would still be lower than your total debt payments.
If you want to get a significant saving the timing of acquiring the loan is essential. Keep in mind that fees for refinance with bad credit is higher than refinance with excellent credit. You need to make some observation at current interest rates for the refinance loan and trends in refinance lending.
What Is Bad Credit Refinance?
Bad credit refinance is taking out a new loan to pay off a earlier loan, if you have bad credit. The new or second loan should have a lower rate of interest or a lower monthly payment. The refinance works when the previous or the first loan is taken during a period of high interest rates; and since then the rate of interests have declined.
If the interest rates difference is not significant, then bad credit refinance might not be possible. In this case, in addition to charging higher rate of interest, bad credit lenders need an extra charge for refinancing.
How To Do Bad Credit Refinance
Before you approach any lender make sure that you opt for bad credit refinance at the right time. To find the right time, research the loan market thoroughly to find out the current rate of interest and the terms on available loans.
You also need to look at how long and how much have you been repaid your current loan. If you have made payments for a year or more bad credit mortgage refinancing might not be possible because the original amount difference and the refinance amount won’t be significant.
Obtaining the three credit reports is another crucial step. This step is to become knowledgeable about your own credit history. As you may know, lenders evaluate loan applications based on applicants’ credit ratings. But the way they use the information for making a quotation would not be the same. Armed with your own credit reports, you know how each lender ‘see’ you.
Once you’re sure the timing is right you may then shop around for loan quotations. Find reputable lenders that offer better rate, terms and conditions. Also rate their customer service level by taking observation on how they handle your case. You can then choose the lender that offers the best overall values and you’re comfortable working with.