While qualifying for a refinance with bad credit is not so difficult, be prepared to pay higher fees and interest. A bad credit refinance will typically have an interest rate of 2-6% more than someone whose credit is in good standing. This means banks are more than willing to help you out with a refinance in this situation; they take one look at your credit score and realize they’re able to charge you more on interest as well as any additonal fees simply because you have no other option.

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.