Refinancing can save money for consumers that have bad credit if the refinanced interest rate is lower than the current loan rate. As of 2015, interest rates have reached record lows, so many people have refinanced to save money. Bad credit makes refinancing harder, but it is still possible.
Consumers with bad credit receive higher interest rates because of the additional risk taken on by the lender. These higher interest rates may be lower than the rate on a current high-interest loan, making refinancing a good option. Consumers with bad credit should pay down their debt and pay debt on time to increase their credit score before applying for a new loan. Banks may require more documentation or a cosigner to extend new credit to a person with a bad credit rating.