A bad credit refinance loan is attractable to anybody who is a homeowner and has several high interest debts to service, such as high interest credit cards and car loans. Because of the higher risk involved in lending to someone with bad credit, the interest on the loan is going to be much higher than for someone with good credit. Typically, the interest on a bad credit refinance loan is 2 to 6 percent higher than that of a refinance loan for someone with excellent credit. Because the loan is probably spread out over 30 years, your monthly payments are going to be lower than if you were to service all those debts such as credit cards or car loans individually. Another advantage is that you get a tax break by consolidating those high interest debts into your mortgage payment.
The cost of setting up a bad credit refinance loan may be more expensive compared to a regular refinance not under credit restraints. Nonetheless, if you make mortgage payments on time for two whole years you should be able to refinance at a significantly lower rate.
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