Scrolling through my social media feed used to be such a relaxing thing for me to do. These days, though, it feels like I can’t go through more than two posts without seeing another advertisement. I’ve noticed something really odd in the past few weeks in particular, though: I’ve seen a ton of ads about refinancing loans.
Maybe you’re experiencing the same thing, or maybe it’s just as strange sounding to you. Either way, it did make me realize that there’s not a whole lot of info out there about how refinancing works for anything other than mortgages. Sure, mortgages are the main type of loan that people do end up refinancing, but there’s certainly no rule saying it’s the only type that you can do it for.
So, if you’re interested in learning about how that works, make sure to keep reading! While refinancing can be tricky to understand, it’s definitely worth learning more about. There’s a surprising number of benefits for consumers to tap into!
What is Refinancing?
Let’s start out with the basics, since this isn’t the easiest concept to digest in all honesty. Refinancing is when you take your current credit agreement, and you alter or adjust the original contract to change some of the terms. Typically, this is done with your original lender, although if they refuse to work with you, you can look elsewhere.
The process can take a while, unfortunately, which might be why it hasn’t exactly picked up steam amongst most borrowers. That being said, though, it can really be worth that investment of time. As far as why it can take so long, it’s because you have to apply to refinance similar to applying for the original loan.
Honestly, that’s the part that is a real pain. However, like I said, it can be worth it if you are able to change the terms of your loan for the better. What might that look like, though? Well, it kind of depends on what your motivation for wanting to change the contract in the first place is.
Ignoring that for just a moment, though, there’s a few more things to be aware of when it comes to refinancing. Now, most often, we hear about it through the lens of mortgages. Obviously, it’s popular in that sector for good reason. However, you can certainly also refinance a personal loan. So, don’t hold off on pursuing it just because of that.
Why Refinance?
For anyone out there still feeling a bit apprehensive about this whole process, I understand. There are pros and cons, after all. There are some details on that here, https://billigrefinansiering.com/, if you were curious about it. Most notably, there is a chance that your lender will extent the years left on your current repayment period, or even restart it entirely. Because that can be a pretty big blow for a person’s wallet in the long-term, it does make some people wary.
Healthy doses of caution never hurt anyone, though. I think it’s good to be hesitant about this sort of stuff. Better to learn more before you dive into any type of credit agreement, whether it involves refinancing or not.
If you’ve got a lot of debt right now, it’s probably quite stressful for you. I promise you, you’re not alone in those feelings. It can be incredibly overwhelming, especially if the interest rates on those loans are incredibly high. In those moments, it often ends up feeling like no matter how many payments that you make, you can’t even make a dent in the overall balance.
That is where refinancing can really come in handy. You see, one of the biggest motivations that borrowers have for wanting to refinance their credit agreements is that the interest rates are just way too high. However, there are some important things to note here in terms of stipulations.
Most notably, there is no guarantee that you will be approved for refinancing. It’s unfortunate, but that’s just how it is – sometimes it’s not in the cards for now. You can always try again later. Another thing, though, is that you might not get an offer that is significantly better than your current contract.
Improve Your Approval Chance
Thankfully, there are some strategies that you can use to have a higher chance of getting approved. The first thing to think about here is how old your credit agreement is. Have you been making your repayments on time for several months or even years? That will work in your favor if the answer is yes.
Additionally, consider whether your credit score has improved since you first opened the lending account. Maybe when you applied the first time, you were only approved with a high interest rate because of your fair or poor credit score. If you’ve since bumped yourself up to good or excellent, you will have a better chance of getting offered a lower interest rate via refinancing.
However, reducing interest rates aren’t the only thing that you can achieve through refinancing. Another popular option is to try to reduce your current monthly payment amount. If you’re struggling with the bills right now, this might be a motivation to apply for refinancing. Typically, in these cases, lenders are fairly understanding.
However, there’s also a good chance that this is when you’ll see the whole “change the length of the repayment period” schtick, so just be prepared for that possibility. It’s not necessarily the worst trade-off, though, so don’t decline solely based on that unless you feel they’re adding an unfair amount of time on.
Truly “daring” borrowers will try to aim for both in their refinancing deal, although it doesn’t always work out (to no one’s surprise). The best way to have a chance at succeeding there is to have a very high credit score and to have made all ofyour payments on time thus far. If that’s the case, though, then you may as well aim to achieve both goals!
