Can You Refinance a Loan After a CCJ? Here’s What You Need to Know

Refinancing is particularly popular with mortgages; however, some lenders allow borrowers to refinance bad credit loans, too. It is a method of replacing an existing loan with a new loan from either the same lender or a new lender at revised interest rates and terms and conditions. It is worth noticing that refinancing is not feasible with all mortgages.  

For instance, you cannot refinance short-term loans, especially those that are paid off in one fell swoop, but you can refinance a personal loan that has a repayment plan longer than a year.  

Whether you refinance a mortgage or a personal loan, it intends to help you avail yourself of lower interest rates. Your bad credit rating cannot preclude you from applying for a loan, but this calls your credibility into question. They will charge high interest rates if your credit rating is not up to scratch.  

However, refinancing allows you to replace your existing loan with a new loan. This could happen after a few payments. The purpose of refinancing can be solved only when you make payments on time. Once you have settled a few payments on time, your credit score must have improved. At the time of refinancing a loan, you can convince your lender of your repaying capacity on time.  

This will help you qualify for lower interest rates when you refinance your loan. Remember that your lender will check your credit rating and income sources again when you put in a refinancing application.  

Now the question is whether you can refinance with a CCJ 

From the above explanation, you can easily understand that it is quite challenging to have a loan refinanced with a CCJ. You should carefully understand that your credit score and current income sources will be perused. A golden rule of thumb says that you cannot have your loan refinanced if your credit rating has not yet improved. Do not forget that your credit report will be reviewed again. Even if you try to refinance your loan from an existing lender, they will go through your credit application and income sources. 

If they find that your credit score sources are not stellar, they will not be able to offer you better interest rates. There is no point in refinancing a loan when your credit rating has not improved.  

The worst scenario is when you have a CCJ. It is a county court judgement that a court grants. It is an order from the court to repay your obligations, which you have been avoiding for a long time. A CCJ shows up on your credit report for six years, and it is issued when your lender takes you to court. Bear in mind that a lender will not take you to court as immediately as you make a default.  

They will send your account to collection agencies, who will keep chasing you through text messages, emails, and phone calls, and if you do not respond to their requests or do not talk to your lender or collection agency to negotiate for better repayment plans, they will use the courts as a last resort.  

Once the matter is taken to court, you can keep a CCJ from appearing on your credit file only if you discharge the whole debt in one go within a month. Of course, it will be challenging to have your loan refinanced when you have a CCJ on your credit file.  

Some lenders may refinance a loan with a CCJ 

Most of the lenders will not be inclined to lend you money in the first place when you have a CCJ, let alone refinance it. However, there is one scenario when you may increase your chances of being accepted for refinancing a loan despite a CCJ.  

This could be possible only when you have taken out a personal loan a few years after a CCJ was issued. Of course, you would get money at high interest rates, but after a few payments, you would be able to qualify for lower interest rates when you get it refinance.  

Normally, lenders do not entertain applications from very bad credit. However, if you are looking to take out very bad credit CCJ loans from a direct lender after three or four years after a CCJ was issued, you might get approval. This is because lenders do not care about old inquiries and defaults. 

Financial experts suggest that you pause borrowing money. You should take a break from this for at least two to three years. However, your credit score will not automatically improve. You should take out a credit builder loan.  

These loans are meant to boost your credit rating. They come with a short repayment period, not more than six months; however, interest rates will be high. If you pay your debt on time, your credit score will significantly go up. 

Affordability still matters 

If you are looking to get approval for refinancing of your personal loan, your lender must take into account your affordability. Making a few payments on time cannot ensure your ability to adhere to repayments down the line.  

Your credit score is not enough when it comes to checking your affordability. They will also check your income sources. If they find that you do not have enough money to repay according to revised repayment terms, you will be straightaway declined.  

No lender would put you at risk because this will not only affect you but also them. No lender would ever want you to approve your application if they suspect that you cannot repay the debt. They would want to avoid the hassle of chasing you to get their money back.  

The final word 

If you want to get refinanced a personal loan, make sure that your credit score is decent. If your credit report is not so impressive, it must reflect that you have made some effort to make some improvement. However, refinancing a loan with extremely poor credit rating or a CCJ is quite difficult. Most of the lenders will reject your application if you have a CCJ.

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