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Bad Credit Refinance - Should I, Shouldn't
I?
By: Roy Thomsitt
It is a common financial scenario across households in the
Western world. Multiple debts have started to build up: a
car loan here, a department store loan there; a bank loan
here and several credit cards there. While all may have seemed
manageable on the optimistic day you took them out, or spent
on them, suddenly you realise that you cannot keep up with
the monthly payments. You miss out on a payment or two, and
suddenly you have a bad credit record. A few more missed payments
and you start to feel the pressure, so start thinking about
refinance.
The silly thing is, in asset terms you are not poor. You
have a home of your own; it is mortgaged, but you have plenty
of equity. Now wouldn't it be great if you could get a new
loan to consolidate those monthly payments and get your finances
back in order? Well, maybe, you think, but can you get bad
credit refinance?
What To Consider Before Seeking Bad Credit Mortgage Refinance
Any mortgage refinance package is not something to be taken
lightly, nor without careful thought about the costs, consequences,
and whether or not it is really necessary. What, then, do
you need to consider before refinancing your debts through
unlocking the equity in your home?
1. First of all, you need to make sure it is really necessary.
You should take a long hard look at your outstanding debts.
List them out, total the amounts owed, total the monthly payments,
and total the amount in arrears. Your cheapest and simplest
way out will be to put your current financial house in order
without resorting to new, and possibly expensive, borrowing.
a. Look at some ways to clear those overdue amounts. By taking
a critical eye to your home budget, your expenditure, see
if there are any regular expenses that can be cut out or reduced.
If so, take the necessary action and make sure that money
goes towards reducing at least one of the outstanding debts
where some amount is overdue. If you have several overdue
debt repayments, and it will take a few months to clear the
outstanding amounts with your newly released funds, write
to the credit companies concerned and tell them what steps
you are taking to pay off the over due amount. That may take
the pressure off you a bit while you get things in order again.
b. Seriously consider how you can make some extra money. Will
a few weeks' overtime, if available, help you clear the over
due debts and allow you to get your finances in order again?
Could you use one of your skills to earn some extra money
part time? Remember, if you take no action at all, your financial
situation will deteriorate. If it is possible to take some
action that will eliminate your overdue debts without resorting
to bad credit refinance, then the chances are it is worth
doing.
c. Have a look around the house. Do you have any things you
do not use, but are worth selling to clear some of those overdue
payments? Do you have some old shares that you could sell,
or an old savings account, with a healthy balance in, you've
not touched for years.
2. You need to consider the other alternatives to bad credit
refinance, especially a debt consolidation loan. Look around
and get a few quotes for consolidation loans, ready to compare
the results with a bad credit refinance option. Remember to
make a note of the costs of each of the loan options, as this
may affect your decision.
3. You have now looked at the possibilities of paying off
your debts without resorting to a new loan or refinancing.
If that came up blank, or insufficient, then now is the time
to consider mortgage refinancing. Again, you need to shop
around and get more than one quote. With a bad credit record,
some lenders may try to get more money out of you than than
is really justified. You have the right to get the best deal
possible. Look very closely at the charges of the lender and
broker, if there is one, and record them, ready to use them
in your calculations to decide what option to take.
4. The final stage is to make a comparison between using bad
credit refinance and using a debt consolidation loan. Really,
you need to do this over the full term of the mortgage. What
you will actually be comparing is:
The mortgage refinance costs, interest rates and repayments
based on the the best quote you have had,
with
Your current mortgage plus the costs of the consolidation
loan. This is important, as the bad credit refinance loan
may be at a higher interest rate than your existing mortgage.
If you are not good with figures (many people are not so don't
feel bad about it!), ask a friend who is to help you out,
or if you can get free counseling from someone who can help
you make the choice.
Once you write down all the figures, the choice will probably
be clear. Remember, however, that with the option of keeping
your existing mortgage and having a separate debt consolidation
loan, once that consolidation loan is at the end of it's term,
say 5 years, you will no longer have any repayments. That
is why it is important to look at the whole mortgage period
to make a comparison.
About The Author:
This bad credit mortgage refinance article was written by
Roy Thomsitt, owner author of the website http://www.eliminate-credit-card-debt-now.com
Copyright Roy Thomsitt - http://www.eliminate-credit-card-debt-now.com
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