Bad credit loan refinance is something many people consider at some point, and it is often a good idea. If you have demonstrated a responsible payment history with the original loan many lenders will be willing to refinance at a lower interest rate, which will save you money.
Why Should I Consider Refinancing?
When you obtained your original loan the lender probably set the interest rate higher due to your poor credit history. As time has passed and you have made payments regularly your credit score has likely improved, possibly making you eligible for a lower interest rate. It is worth doing some research to see if it makes sense to refinance at the lower rate.
Will Refinancing Always Save Me Money?
Yes and no. If you can get a lower interest rate then your monthly payments will probably go down. However, if the term of the loan is extended you’ll be making payments for a longer period of time which could cost more money in the long run. Also, the lender may charge a fee as part of the refinance process. Take that cost into consideration when you’re deciding whether or not to refinance.
Do I Have To Use The Same Lender?
No, you don’t have to refinance through your existing lender but it’s usually a good idea to use them as your starting point. Because you’re an existing customer the lender may be willing to reduce or waive the refinance fees. Also, since you’ve established a good payment pattern with them they will likely look at you more favorably. It’s always a good idea to comparison shop, though, so make sure you do check out other lenders for refinancing options. Pay attention to the fees and the term of the loan when determining if they are offering you a good deal.
When Shouldn’t I Refinance?
It’s always okay to check on the possibility of refinancing, but there are times when you shouldn’t go through with the process. For example, if you’re within 6 to 12 months of the end of the loan term then refinancing will probably end up costing you more money. Another example is if you are preparing to purchase a home. Mortgage lenders usually don’t like to see borrowers seeking other new loans at the same time or just prior to seeking a mortgage loan.
Where Can I Go If I Have More Questions?
There are many resources available to answer your questions about refinancing an existing loan. Lenders of course will answer questions about their specific programs, but keep in mind that they have a vested interest in any refinance loan because they will be making money from it. Go to your local library and look for books on the subject, or read a money and finance magazine.
If you are interested in bad credit loan refinance then it’s important to consider several things. Look beyond a lower interest rate and take into account the length of repayment term, any associated fees, and whether or not refinancing will impact other plans you may be making.