Why It’s So Difficult to Refinance Bad Credit Loans
With mortgage rates going under, there has never been a better time to refinance. However, while refinancing seems like an easy trick for some people, it’s not that easy for others – namely those looking for bad credit loans. Those who have bad credit have always struggled with getting a simple loan; refinancing is something they can only dream of. There are so many obstacles that need to be overcome that it almost makes them want to quit the attempt altogether.
How Bad Credit Affects Refinancing
The average “bad credit” will usually differ from one lender to another. What one lender usually sees as “bad credit,” the other will see as “this is OK.” When it comes to Australia, what is below 509 is considered “bad credit,” and that’s exactly when you might encounter some difficulties in obtaining a refinancing.
Overall, poor credit will make refinancing bad credit loans very expensive for the consumer. The issue is not exactly that you can’t refinance; you do have the possibility. However, since the risk is very high, the lenders want to make sure that they will get their money back at the end – which is why they either set high-interest rates or ask for collateral.
Obstacles of Refinancing
If you’re still wondering why so many people seem to hit a wall when it comes to refinancing, here’s what keeps bursting their bubble. No matter if you are looking for a home loan refinancing or one for your car, everyone seems to bump into these problems at some point.
Not Enough Down Money
The problem with refinancing bad credit loans is that you are no longer taken seriously. Banks see on your credit score that you are unable to keep up with your payments, and as a result, they refuse to give you a bigger sum to cover your debt. They literally limit the limits.
One option would be to save some money and try to apply again. Many lenders are willing to wait until you gather the money that you need but only as long as you make your intentions clear.
The “risk factor” mentioned above applies here as well. No bank will let you take out bad credit loans without putting you through a great deal of hell first. In a way, it’s understandable; imagine if you were to lend someone a great deal of cash and that someone would “forget” about returning the money. You would be reluctant to lend them money the second time, wouldn’t you?
The same thing applies to banks. They can see everything on your credit score, and if they see too many missed payments, they will believe that the same would happen to this loan. You may try to convince them as much as you want; if they think the risk is too great, they won’t give you the loan you need to refinance.
Interest Rates Are Too High
Sometimes, the logic of banks is beyond us, consumers. We’re in this pit of debt simply because we could not handle the high fares – so what sense would it make to bump them even higher? To them, however, it makes a lot of sense. At any point, you risk missing your payments – and they will lose money. So, they need to squeeze as much cash from you as they possibly can.
The problem is that these high fares are the perfect recipe for disaster. They are so high that, if it were difficult to pay before, now it would be next to impossible. This is why many people quit the idea of refinancing altogether.
With bad credit loans, there is always the issue of collateral. Since banks are now aware of the fact that you tend to miss on your payments, they will try to grab as much certainty as possible – and this usually means your house or your car.
The problem is that if you’re refinancing a loan, you probably do not have a property that you can safely call “yours.” It’s only “almost yours.” That usually cannot be used as collateral, which is why so many people have difficulties getting bad credit loans.
This is actually a fairly common problem. Not many people know where to look for lenders, which is why they end up with “sharks.” Plus, while there are many legit lenders out there, some may offer better rates than the others. A lot of people hit a wall simply because they stop at just one lender that told them “No.”
It’s not easy to refinance, that’s for sure. But with the right help, nothing is impossible – even if you have bad credit. With the right help, you can get some bad credit loans that will help you a great deal. If you are looking for such help, contact Bad Credit Loans today. Whether you’re in need of an affordable loan or just some advice, our friendly team members will surely be able to help you.