The beginner’s guide to refinancing your personal loan
Refinancing your personal loan simply means replacing the loan you currently have with another loan from either your current lender or a different lender.
Why should I consider refinancing my personal loan?
If you have multiple debts on the go and are struggling to manage all the payments, refinancing and consolidating those debts could help you get your repayments under control. For example, if you have an existing personal loan and an outstanding credit card balance, you could consolidate these debts into one personal loan. This means that instead of making multiple payments each month, you only need to worry about one consolidated loan. If the new personal loan has a lower interest rate than your existing loan and credit card, you could also pay less in interest over the life of the debts.
Another reason to refinance is to get a better deal. If you’ve improved your credit score or your financial position since you took out your current loan, you may be able to get a new loan with better terms, such as a lower interest rate. This means you could save money on the overall cost of the loan and you could even pay it off sooner.
How do I refinance my personal loan?
Before you start the refinancing process, make sure you know all the nitty gritty details of your existing loan. What is the balance remaining? What is the interest rate? What fees are you paying? What is the total cost if you were to stick it out and pay off this loan in full? Remember to make sure you factor in any break fees or early repayment fees that may apply.
The next step is to check your credit score to see where you stand. Make sure all the information on your credit report is correct. Incorrect information on your file may lower your credit score, so making sure everything is accurate and up to date will give potential lenders a clear picture of your credit history.
Remember to do your own research and calculations to find out if you can save money by refinancing. If you need help crunching numbers, check out our personal loan calculator to work out your repayments.
Now that you have a full understanding of your current loan and the refinance options that are available to you, you’re now in a position to decide whether to refinance your personal loan. Don’t forget, you can always approach your existing lender and see if they can match the offers you have found elsewhere, so you may be able to get a better deal without having to apply for a whole new loan.
If you do go ahead and successfully refinance, ensure that your old loan is fully cleared and that the lender has closed your account to avoid any additional account fees.
Want to learn more about personal loans? Head over to the Learning Hub and get started today.