Refinancing with poor credit score

Can you refinance mortgage with bad credit

You can do it, even with poor credit! A question many of us would like to answer (even if we are embarrassed to admit it), how do you achieve refinancing with poor credit? One fast answer is that refinancing can be a powerful tool in some situations that might actually improve your credit rating. One example is consolidating credit card debt. Credit cards are designed for obtaining cash quickly, with the expectation the money will be repaid within a few months. Cards are a source of easy credit; you can use them whenever you want, or never use them and still carry them in your wallet.

In exchange for this convenience and the risk credit card companies face, borrowers are penalized with a high annual percentage rate, often in the range of 20 to 30 percent. If financial pressure forces you to repay these over a prolonged amount of time, you may find yourself wasting money, a stack bigger than what you borrowed. An obvious solution, then, is to borrow money from a more amiable source, such as a bank, and pay off your cards with it. Banks and other long-term lenders offer much lower rates than credit card companies, and so payments can be smaller and less painful.

If your credit card debt is small (less than ten thousand), it is not too difficult to obtain a short-term loan. If you must tackle larger problems, making a financial arrangement means learning to do tricks. Larger loans often require good credit, or some form of collateral. This typically means obtaining a second mortgage on a home, if you own one. If you have other assets, such as land, you may wish to simply sell the land, especially if it is not particularly productive.

Obtaining a long-term loan is frequently better than continuing with the credit card companies month after month, but such loans are peppered with their own risks. If you have bad credit, you can probably expect a higher interest rate, even with collateral. Contracts too often have penalty clauses, lightly termed “provisions,” which means you have to pay a fee if you repay the loan early. There also may be transaction and closing costs involved. As with any financial decision, it is important to shop around and understand all the fees and terms of the contract. The borrower should also beware, some of the services that specialize in refinancing to escape debt might actually be a front for loans that cost you more money.

If the sum is large enough, you may wish to contact an accountant or even an attorney to help you negotiate a lower interest rate. They are often the most reliable source of help, and their professional advice is worth the fee.

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