Refinancing After a Bankruptcy - What You Need to Know?

It is not easy to refinance your home loan or any other loan if you have filed bankruptcy. However, after getting discharged from bankruptcy, you can make use of options available to you. You may find several lenders able to consider your application. There are specialized lenders offering mortgages to individuals with bad credit scores. However, the interest rates will be higher.

Refinancing after a bankruptcy

Be proactive. Learn about the different options you can avail after the bankruptcy is discharged. You will also have to notify the lender about the bankruptcy. It is mandatory for credit agencies to keep the records of all the bankruptcies on your credit file.

Refinancing process after you are discharged

Start with the comparison of the services and products each specialized lender has to offer. Apart from ensuring that the lender can provide a loan to address your needs, consider a history check. The lender has to be reliable and trustworthy.

Keep in mind that there is a bankruptcy in your credit history. So, the term will be different from the terms offered to those having good credit. You may go for loans with minimum ongoing fees or no-frills standard variable rate loan. An offset and redraw facility can help you in reducing the interest amount.

Also, compare the interest rate offered by different lenders. Go for the lender offering the lowest interest rates. Still, expect an interest rate higher than the normal as you are a high-risk borrower.

Compare the loan-to-value ratio (LVR). LVR is the ratio of the loan to the value of the property. Being a discharged bankrupt, you will get a lower LVR loan.

You should avoid applying for multiple mortgages. Each lender will check your credit file, and every loan application will be there in the credit file. Any unsuccessful application will send negative signals to other lenders. Therefore, take time. Seek professional assistance whether you are refinancing your home loan after bankruptcy, rebuilding credit after bankruptcy or you need to apply for credit cards after bankruptcy. Professional support before submitting a refinancing application will help you in making an informed and a well-calculated decision. Though it will be still higher than the regular interest rate, professionals will help you in curtailing the interest rate.

Professionals might also help you in finding a reliable and trustworthy lender specialized in refinancing after a bankruptcy.

Maximizing chances of application approval

Following are the tips that will improve the chances of approval:

  1. Being released from bankruptcy will significantly improve your chances of getting your refinancing application approved.
  2. Saving a deposit is also very helpful when you are applying for a loan. Having a significant deposit evidences your financial stability and security.
  3. If you have a history of timely debt payments, demonstrate your repayment history. This will also improve the chances of approval.
  4. You can also provide a proof of a long, healthy and steady employment history.

Every single loan application is included in your credit file. So, avoid applying for too many loans. An excellent credit report has a credit score that is between 700 and 800 which is the where your credit score starts. The average has a score of 650 and lower. These low credit scores are what keep many people from getting approved for credit cards, mortgage loans can car loans. If you are planning to own your own home one day, this can be a real problem. Smart people will get a copy of their credit report before they even seek a loan of any kind so that they can correct any mistakes that are made or so that they pay off some of the debts that are listed. Doing this before you seek credit can change the outcome of the application.

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