How to Refinance Your Personal Loan
LOS ANGELES, December 30, 2021 (Newswire.com) - iQuanti: Refinancing can be a good idea if you can lock in a lower interest rate or want to lower your monthly payments. It's also a good way for you to save money on interest and pay off your loan faster if you can afford higher monthly payments. If you're looking to refinance your personal loan, here are the steps you can take to make that happen:
1. Start with a Pre-Qualification
Many lenders have a pre-qualification form that you can submit before applying to refinance your personal loan. Examine your pre-qualification documents carefully and compare them to the terms and conditions on your current loan. Pre-qualification is a "soft" inquiry on your credit that doesn't register on your credit report, so it won't affect your credit score.
2. Do the Math on Interest and Refinancing Fees
Make sure refinancing won't cost you more money before deciding to move forward with this option. Calculate how much you'll pay during the life of your personal loan, and make sure you include the interest rate and any fees. In some cases, refinancing is more expensive than simply just keeping your current loan and paying it off. You should only go forward with refinancing your loan if you'll end up saving money in the long term.
3. Use the New Loan to Pay Off the Old Loan
If you apply and get approved for refinancing your loan, the new loan should pay off the old one. Some lenders may transfer funds directly to your bank account, while others may just pay off your first loan directly. If the lender doesn't do either, you may want to consider paying off the old loan as a first step when you get the new loan money deposited into your bank account. This may also give a boost to your credit score since the account will register as "paid in full."
4. Make Sure the Balance on the Old Loan is Zero
Carrying a balance on your old loan, even a small one, could result in additional monthly fees and interest payments. One common mistake you'll want to avoid is paying off the old loan just before another fee or interest charge is assessed. Check a few weeks after you make your payment to make sure you've paid it off in full.
5. Budget Properly to Make Your New Payments on Time
Refinancing can lower your monthly payments or allow you to pay off the loan faster, and maybe save you some money in interest payments. Now that you've refinanced your loan, all you need to do now is make your monthly payments on time. Stay on top of this and you'll improve your credit score and eventually repay the loan in full.
The Bottom Line: Is Refinancing the Right Move for You?
Refinancing can be a good move if you're able to lock in a lower interest rate, need new loan terms with lower monthly payments, or want to pay off your loan faster. Borrowers should do research and compare their options to find the right refinancing terms for their needs.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
Source: iQuanti, Inc.