Bad Credit Refinancing
Is Bad Credit Refinancing Right for You?
Understanding A-, B, C, and D Paper Loans
If you have a lower-than-ideal credit score and lenders start talking to you about alternative or non-conforming B/C paper loans, don't give up hope. Whether you're a first time home buyer or a homeowner with bad credit and an outstanding mortgage, bad credit refinancing loans can give your credit rating a shot in the arm and, at the same time, save the home you've worked so hard to buy.
You may have the increased burden of fighting a home foreclosure, holding off a bevy of creditors, and struggling with income. Mortgage refinancing can attack the problems across several fronts simultaneously. Your credit will improve once you restore regular and dependable house payments. Your lower interest rate will be more affordable, and you can apply mortgage savings to pay off your other debts. It all adds up to a big win.
Bad Credit Refinancing Takes Work
If you're looking to get a bad credit refinancing loan, there's work to do. See if your current lender can provide sub prime loans. But, your current mortgage lender may not offer home loan restructure packages with the interest rate critical to your recovery. Depending on the extent of your credit rating, you may want to find a cash-out refinancing loan that pays off your initial mortgage and frees up funds that you can use to retire your outstanding debts. Another strategy is to take an interest-only loan which will keep your monthly payments low until you restore your credit and income.
What is a B/C Paper Loan
The safest loans for a lender to issue are those that conform to the standards they recognized as providing them with the lowest level of risk. If there is some additional level of risk calculated by the lender, and the loan does not conform to the ideal standard, and these are given a letter grade, such as A-, B, C, or D. This can also be called subprime loans. They are harder to get than they used to be, and there are stricter guidelines in place, but these loans still take place, so don't give up.
It pays to shop around for lenders. Obviously, the most important element in the process is to receive a home loan that establishes a workable interest rate lower than the one you're facing today. Once you retire your original mortgage, your credit rating will change. If you commit to pay your new loan on time and use the cash from the lower interest rate to repay other creditors, you'll make additional headway. The best news is that your refinancing loan creates a new mortgage -- and a fresh start.