Still, these days you usually find a significantly lower interest rate no matter what your credit is. There are many ’subprime’ lenders who have set up business lately specifically to cater to the needs of those with bad credit. And the major banks are trying to keep up with with the constant lowering of interest rates to still appease the market. See, bad credit finance isn’t so difficult after all.

So what are the two main reasons for wanting to refinance an existing loan? Debt/bill consolidation is a common practice many borrowers seek these days because it will lower your overall interest rates. You may be able to get a bad credit refinance at a rate of 12%, which is quite a bit lower than say, 20% on your existing credit cards. Additionally, the bad credit refinance will have a longer life span, usually 30 years. This means not only your interest rates are reduced but your monthly payments are reduced as well. The other main reason people are likly to refinance is their original mortgage has an extremely high interest rate; this is an effective way to reduce that intrest rate by quite a large percentage. This is especially true if someone’s recently filed for bankruptcy, result in a terrible interest rate. Having claimed bankruptcy or not, if you have significantly improved your credit since you’ve originally gotten a mortgage loan, it might be wise to refinance that mortgage for a lower rate of interest.

Also take note if your refinance has a fixed interest rate, and you’ve improved your credit again over the span of a few years, you will be able to refinance the loan a second, third, fourth time etc. As long as you respect your budget and always pay your bills on time, a refinance will make it quite a bit easier on you to build your credit back and make this possible.

Home improvements are a good reason for using your home equity to get a loan because following the renovations, your home will be worth more to you and the lender alike. Such an investment usually requires a much larger loan than an average consumer loan you would be able to qualify for if you have bad credit. With education you’re also willing to to use your home equity as leverage if you know this will help you improve your income in the future.

Using such a loan to avoid bankruptcy definitely has it’s benefits as well, as being forced to claim bankruptcy will be highly detrimental to roughly a decade (or more) of your financial well being.

How much you can borrow with a home equity loan depends on two things: how much your home is worth and how much you currently owe on any of your mortgage loans already established. Furthermore, with bad credit lenders are likely to charge you a higher interest rate than if you had excellent credit. Though just because the interest rate will be higher, a home equity loan is still a good option. A interest rate on a home equity loan is typically 4-8% lower than it would be on your credit cards. Also keep in mind that you might be able to get a tax deduction on a home equity loan, and you cannot do so with your credit cards.

Another plus side to the home equity loan is that you can usually take as much time as you need to pay it off. Lenders are in the business of money, and although you’ll have to agree to a foreclosure (the forced surrendering of your property if you cannot pay back the loan), lenders are much more willing to give you the extra time. They would much rather have you pay back the money you owe on the loan than acquire a property that they have to deal with.

Seek advice from a credit professional to see if this is the solution for you based on your circumstances and your credit. There may be a better option out there for you but discussing your options with a professional will help you figure that out.