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a Good Idea?
Home Equity Loans
REFINANCING WITH BAD CREDIT
Below is a recent question we received from a homeowner
considering refinancing with a
credit score in the low 500's, and
Dear Star Loan Services,
I am in need of help, fast! I am in the middle of
my mortgages. My husband and I have about $60,000 in
debt, $35,000 in equity line and our main mortgage is $175,000.
Our credit is very poor and about two years ago we visited a
credit repair agency to help us develop a
financial strategy for
manage debt better and
controlling finances. However, our credit score is still in the 500s.
Nonetheless, we were able to locate a lender that has offered to
refinance our loans and also give us
cash back so that we can pay
all of debts off.
Is refinancing a smart decision? It seems like we will save money as a result of
adjustable rate mortgage at 9.1 percent. However, we will
only be able to pay off all of our debts in four years, not two.
What is going to happen in two years, once the ARM expires? The
interest rate on your ARM is likely going to increase significantly.
And, only if you have been
money wisely and
begin paying all of your bills on time, you still will not have a
good enough credit rating for refinancing into something more
However, if you can get everything paid off by refinancing and then
begin contributing your 'savings' each month toward paying down that
mortgage as quick as possible,
refinancing can be a good idea.
However, when refinancing with poor credit, it is important that you
utilize a reputable lender that is going to report your on-time
payments to all three major credit reporting agencies. This will
improve credit scores. If they
neglect to do this, at the conclusion of your loan, you will likely
still have a bad credit score.
In addition, you'll need to determine if your loan is going to have
any sort of pre-payment penalty associated with it, and for how
long. Will you be able to refinance without having to pay a
significant penalty if you decide to
sell your home? What sort of
closing costs are associated with the loan? High fees can result in more
Before committing to any loan, please
contact us so that we can
determine if the offer being presented to you makes sense for your
situation. Also, we invite you fill out a free, no obligation
application for refinancing, without having your credit checked!
Also, it appears as though you are in over your head in
with a nationwide network of credit counselors that will help you
regain control of your finances and help you prevent future
incidences of debt from occurring. Submit a free request for
consumer credit counseling here. There is no harm in hearing what we
can do for you!