Can I Refinance My Home Loan with Bad Credit?
Managing finances is something that everybody needs to deal with. However, dealing with finances can be challenging, especially if you have bad credit. Poor credit in the past can cause problems with your current financial dealings, including home loan refinancing.
It is still possible to refinance a home loan even with bad credit. By approaching lenders who specialise in bad credit home loans, you should be able to refinance your home loan.
Even if you suffer from poor credit, there is no need to despair. Several lenders provide bad credit home loans and special refinancing options that aren’t offered by big banks. Seeking the advice of a professional broker can help you understand how to position yourself for approval.
Before we take a look at how to refinance bad credit home loans, let’s first consider what can lead to a bad credit scenario.
How you may end up with poor credit
There are many reasons why you may have ended up with bad credit. Here are some of the possible reasons why you may be suffering from bad credit:
- You have defaulted on a loan, utility bill, or credit card
- You have several outstanding debts
- You have filed for bankruptcy in the past 7 years
- Lenders have declined to offer you a loan
If any of the above is present in your credit history, lenders and banks will be sceptical about offering you a loan. If you experience any of these after you manage to get a home loan, it will affect your refinancing ability.
How bad credit affects your prospects with refinancing
Refinancing a home loan involves swapping your existing home loan for a new loan with new interest rates and new features. Most people who refinance a home loan do it to access loan features and interest rates that suit their finances better.
Even if you have been successful in obtaining a home loan in the past, refinancing can be difficult with poor credit. This is because most lenders will reserve their best loan options for people with good credit.
Lenders have the impression that people who suffer from bad credit demonstrate risky financial behaviour and that they cannot provide security. Even if your loan has enough equity for you to avoid paying LMI during refinancing, if your credit history is poor, lenders will deem you to be a risk.
Is it possible to refinance at a better rate with bad credit?
Most people who look to refinance a home loan do so to get better interest rates on their property. If the interest rates of your current home loan were established while you had a good credit score, then you’re unlikely to obtain better interest rates.
It is always advisable to clear up some of your credit issues before you approach lenders for refinancing. While certain credit issues such as bankruptcies and defaults will take up to seven years to clear up, other issues can be resolved in the shorter term.
To improve your credit situation, try and reduce your outstanding debts as much as possible. Also, make sure to keep a clean record on your current home loan repayments. Doing this can help improve your credit issues and your refinancing prospects.
To know more about how to improve your credit situation, talk to an expert mortgage broker.
How refinancing a home loan with bad can help you
Many people want to refinance their bad credit home loans because they struggle to manage their loan repayments alongside other expenses. While refinancing may not help lower your monthly mortgage repayments, it can allow you to consolidate all your debts. Consolidating all your debts will mean managing only one home loan repayment.
Refinancing a home loan with bad credit is certainly helpful if you are struggling to manage your finances. Do understand that while you won’t obtain lower interest rates, refinancing will make debt consolidation simpler and affordable for you.
How to refinance bad credit home loans
When it comes to refinancing bad credit home loans, directly approaching big banks may not help. You need to approach non-bank lenders who specialise in offering bad credit mortgages. Such lenders offer a variety of non-standard loans, and many of them offer flexible packages to suit your financial condition.
To approach the right lender for your situation, you need the help of a professional consultant. Professional consultants have access to several non-bank lenders in the market, and they can help you find the right lender. Moreover, consultants can even offer you valuable advice on which refinancing options to choose from.
Refinancing bad credit home loans will mean paying interest rates that are higher than normal. You don’t want to stick to higher interest rates for a long time. Fortunately, once you’ve made enough repayments, you can refinance back to standard rates.
Refinance your home loan today
Loans for People with Bad Credit can help you understand the various options to refinance a home loan. Our team of expert brokers can help you approach specialised lenders and compare refinancing offers. We’re specialists at providing bad credit refinancing options, and we’re here to help you out!
To find out more about how to refinance a home loan, get in touch with us today!
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