Refinancing with bad credit may not be easy. Refinancing is replacing an existing loan with another loan that offers more attractive features, like a better term or a lower interest rate. Generally, people refinance a loan in order to lower their monthly payments by lowering their interest rate or extending the term of their loan. Read on for some ideas if you are interested in refinancing but have bad credit.
Consider the timing
If your credit score was higher when you got your current loan, you might not be able to save any money by refinancing. Usually when refinancing, the lowest interest rates are reserved for the consumers with the highest credit scores. You can certainly look into offers and have your lender crunch some numbers to see if you could benefit from refinancing. But keep in mind that if you can’t save money, you should wait to refinance until your credit score is better and you can get a better deal.
Make a commitment to yourself to clean up your credit
If your credit score is suffering because of bad credit habits, make a plan to change your ways. Rather than perpetuate the cycle of debt, devise a plan for getting back in good financial standing. Pay your bills on time, make more than the minimum payment and stop making impulse buys that you can’t afford. That way, you can improve your credit score and possibly refinance with better loan terms in the future.
Refinancing is a great way to save money, but it only works if you can get a lower monthly payment either from lower interest rates or by extending the term of the loan. If neither of these options is available to you, it might be a good idea to reassess your monthly budget to see what else you can adjust to be able to afford your necessary expenses.