In America there are any numbers of people who for a number of reasons have bad credit. Bad credit means that their credit rating is low. One may feel that people with bad credit may not be able to refinance. But the fact is that if certain parameters are satisfied then persons who have bad credit can also refinance their homes. This is referred to as bad credit refinance.
Bad credit refinance is slightly different from a regular refinance loan. One of the major differences is that a bad credit refinance will as a rule has an interest rate which is much higher than a regular refinance rate. Depending upon the credit rating of the borrower this could be anything between 2-6% higher than normal. People carry out a bad credit refinance for some reasons dictated out of necessity.
Firstly any one who has high balances on several high interest rate credit cards, car loans or other forms of installment debt may like to consolidate these debts. A bad credit refinance loan with an interest rate of 12% is still better than paying 21% on multiple credit cards. As the bad credit refinance is spread out over 30 years, the monthly payment for the loan will always be lower even if the interest charged is higher. This adds up to a monthly saving.
Secondly a person may decide to go in for bad credit refinance to get a lower mortgage rate. Such a person may have decided earlier to get a mortgage after filing a recent bankruptcy. The interest rate on this loan is likely to have been extremely high. After making some improvements to his/her credit, the borrower may try to get a new bad credit refinance. He would try and get a lower interest rate than what he was paying. If a person was paying 13% interest, a 10% interest rate could help lower the monthly payment and cut interest costs with excellent results.
But bear in mind that getting a mortgage with bad credit is an arduous task. Banks and people who lend money know the difficult situation of a man with poor credit. Like Shylock they will take their pound of flesh and squeeze people with bad credit with extremely high interest rates. They will also offer poor repayment options and the borrower may have no option but to accept them.
If your credit is bad then you yourself will have to look for a solution to solve your problem. One method is to use collateral of some sort, and place it as a surety for the loaned amount. If you own property that has a high market value then you are in the clear. The banks will then lend you more money at a lower interest rate. Their logic is that if you fail to pay then they can always take over the property.
If you dont have property then you will just have to find the best mortgage possible. One way to do this is to look on the internet, and use programs or databases to find the best offers. You can get a Mortgage search and see what is best for you. Once you have obtained a mortgage, you should do everything in your power to raise your credit score. This will ensure that you dont fall into a similar trap again. Do try and clear all of your payments as per schedule. This will go a long way in improving your credit.
Sometimes your bank may decline to refinance your loan. This could be in case the bank considers you as a high-risk borrower. Then you have no choice but to contact a private lender to refinance with a hard money loan. Hard money loans generally have astronomical interest rates and over head fees. But you can get breathing time and stop a fore closure. Thus bad credit refinance can be done but be ready to sweat it out.