How to Refinance Bad Credit and Repair Credit in One Move!

Adam Brand Adam Brand | Operations Director

Are you having a hard time obtaining a car loan or credit card because of previous credit problems? Do you wish there were a way to re-mortgage your home at a lower interest rate despite having poor credit? If so, you might want to consider an affordable secured loan to consolidate all of your current high-interest debt into a single financing package. Secured loans are a great way to refinance bad credit while repairing your financial profile.

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What is a secured loan? It is a loan offered blenders in exchange for collateral. In most cases, the collateral for secured loans in the UK is the borrower's home. Companies are willing to lend money with the understanding that they can repossess and sell a home in the event of default.

The advantages of this type of loan are well suited to the individual with bad credit. Those advantages are:

  • being able to borrow large sums for long periods of time
  • flexibility to spend the money however you see fit
  • Reasonable interest rates and comfortable terms.

Secured Loans for Refinancing

It might sound counterproductive to take out an additional loan when you are already struggling. However, it actually makes good sense when you think about it. To make it easier to understand, let us assume you have two outstanding personal loans of £10,000 apiece, each with interest rates at 7% or more. A secured loan taken against the equity in your home could offer you a much better deal.

Let us also assume you have £30,000 in equity from your home that you can use as collateral for a secured loan. Even at an interest rate of 5%, you would still be doing better financially by paying off your two personal loans with a single secured loan. Your monthly payments would be lower, making it easier on your budget as well. Taking out the full £30,000 would even give you £10,000 extra to pay for other expenses.

Repairing Your Financial Profile

A well-planned loan refinance strategy does more than just improve your monthly budget. It can also help you repair your financial profile, especially if you are currently struggling under the weight of high-interest debt. For example, having a lower monthly payment makes it easier for you to keep current. That is always good for your credit profile.

In addition, paying off your high interest debt will look good on your credit report. Future creditors would rather see you paying faithfully on a low interest secured loan than struggling with multiple higher interest personal loans and other debts. Those high interest accounts showing up as closed on your credit report proves to future lenders that you found a way to responsibly pay the debts off.

What You Need to Know

If a secured loan for refinancing high interest debt sounds appealing to you, there are three things you should know. First of all, your borrowing limit will be dictated by the amount of equity in your home. If you only have £30,000 in equity, the maximum amount you would be able to borrow is £30,000.

Second, your credit history will probably determine your interest rate and loan terms. So be prepared for higher rates and shorter terms if your credit profile is extremely cool. You will still likely get a loan but you will just pay more for it.

Third, most lenders use what is called the loan-to-value (LTV) ratio to help determine loan amounts. An 80% LTV ratio means you can only borrow up to 80% of your equity. It is rare to find secured loans offered at 100% LTV; keep this in mind when you are shopping around.

You can refinance bad credit with a secured loan to reduce your monthly payments and repair your credit profile. Secured Loan Experts believe secured loans are one of the most powerful tools that consumers have for consolidating high-interest debt. You should consider this kind of financing if you own a home.

Free Help and Advice from the Professionals

If you have any questions about how to refinance bad credit why not call our friendly team of secured loan experts, our advice is FREE. Our team can scour the whole of the market for the best refinancing secured loans deals offered by high street and specialist lenders. They will help you compare these side by side and chose the best deal to suit your individual circumstances. Once you have identified the right offer our experts will create and submit an optimised application ensuring that your case is viewed by the lender in the best possible manner.

Just call our friendly team for FREE expert help and advice today.

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