After filing bankruptcy, people often wonder if they can obtain a new loan or possibly refinance the loan they currently have. Although it may seem especially difficult to refinance after bankruptcy, it doesn't have to be. Within as little as six months after you have filed bankruptcy, you will have lenders who are more than willing to allow you to refinance your current loan. In fact, if you choose to refinance your loan, you could actually be taking steps towards rebuilding your credit.
When refinancing after bankruptcy, you will obtain a "bad credit loan". A bad credit loan is a great way to help rectify your bad credit. Interest rates of bad credit loans will vary with each individual situation. Depending on your current credit score and financial situation, your interest rate could be significantly higher or lower.
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In the six months following your bankruptcy, be sure to establish a excellent payment history. This is done by simply paying your current mortgage and other bills on time. This is also an excellent time to obtain a credit card so that you can start building a good credit history. If at all possible, try increasing your savings account. Your application will look better if you have some cash assets.
Next, begin your refinancing process by researching lenders. It is important that you know what their interest rates are. There are numerous online websites that allow you to easily compare company's rates. Be sure to look at both their interest rates, as well as any fees they charge for refinancing. If you have a choice of companies, it is better to choose one with a slightly higher interest rate and lower fees. When looking to refinance after bankruptcy, you will often be required to work with a sub prime lender. With such lenders, you will generally be forced to pay an interest rate that is a few percentage points higher than someone with no bankruptcy.
Whenever possible, try to avoid cashing out the equity you have in your home. Although it is possible to cash out your equity to buy a new car or make home improvements, it is better to leave the equity alone so that you can improve your credit rating.
After you have refinanced, you can then begin to rebuild your credit. In approximately two years, with regular on time payments, you can generally lower your interest rate. You will need to continue to add to your savings, as well as make all payments on time.
Many people believe they cannot refinance after they have filed bankruptcy. This is simply not true. When looking to refinance after bankruptcy, be sure to shop around to ensure you will get the best overall rate. With a bit of research and patience, it is possible to refinance after bankruptcy.
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