Deciding to refinance a personal loan can be a smart financial move if you’re looking to consolidate your debt.
Refinancing a personal loan means that you pay off your loan with a different, new loan that has terms that are better for your financial health, such as a lower fixed monthly payment or a lower interest rate. By refinancing your personal loans, you’re consolidating your debt. Instead of having multiple loan accounts open, you can pay off all of your old loans with just one existing loan.
Are you interested in learning more about whether refinancing a personal loan is a smart financial move for your personal situation? Keep reading to learn more!
How Often Can You Refinance a Personal Loan?
You technically receive a personal loan as long as you’re approved for a new loan to pay off your old personal loans. However, it’s unlikely that you’ll be regularly approved for new loans, with better terms if you’re just searching around for a refinance loan that’s financially beneficial to you.
Our take:Lender focused on poor credit, based out of Chicago currently offering loans in 29 statesAPPLY NOWLender: OppLoansCredit ScoreLoan Size/AmountLoan TermAPROrigination Fee350 – 600$500 – $5,0009 – 2459.00% – 199.00%0.00% – 3.00%
Hypothetically, there isn’t a limit to the number of numbers that you can go about refinancing a personal loan. However, if you’re always refinancing the loan, the savings that you do earn with the improved loan terms are eliminated through the money you’re spending on fees.
Instead of constantly refinancing, consider strategically refinancing by waiting to see if you’re able to qualify for a goal interest rate (or other terms) that’ll help you to save money and pay off your debt faster!
Even if you’re only refinancing a few times over a period of a couple of months, you’ll be dragging out the repayment of the debt, which could end up costing you an increased amount of interest and other fees.
When Should You Refinance a Personal Loan?
Even if you’ve found a personal loan that has a better interest rate that’ll save you money, refinancing your personal loan isn’t always the smartest financial move. It could potentially cost you more than it’s worth in the long haul.
However, there are plenty of times when deciding to refinance a personal loan is a smart financial move. The most common reason that someone will want to refinance a personal loan is when they’re looking to pay a lower overall amount than they would during the remainder of the loan.
This can happen if your credit score has improved, if you’ve started making more money and now have a way to pay off your loan faster than you may have anticipated, or you’ve discovered that the interest rates have lowered. Another reason that people will decide to refinance a personal loan is if they’re looking to shorten the term of their loan or they’re looking to decrease the amount they’re spending on their monthly payments.
Our take:Online marketplace to find you a personal loan offer that matches your needsAPPLY NOWCredit ScoreLoan Size/AmountLoan TermAPROrigination FeeAll can apply$100 – $15,0001 – 604.99% – 1,386%Varies by lender
In addition, if you’ve decided that refinancing your personal loan is the right move for your financial situation, take the time to learn if the repayment schedule makes sense for your current financial situation. For example, if you’ve decided that you want to choose a shorter loan term in order to receive a lower interest rate, the amount that you’re paying each month will likely be higher.
If you’re not able to afford higher monthly payments, refinancing your personal loan wouldn’t make sense. Before making the application for a new loan official, make sure that the estimated monthly payments fit inside of your budget. Late fees, because you’re not able to make the monthly payments, will not only increase the total amount that you’re paying off towards your loan, but will also have a negative impact on your credit score.
Why You Should Refinance a Personal Loan
When you’ve decided to refinance a personal loan, the funds that you’ve received from the new loan are being used to pay off the debts of the old loan. Here are a few reasons you should consider refinancing your personal loan:
Lower Interest Rate
You have the potential to score a lower interest rate than what you’re currently paying on the debt that you have now. A lower interest rate can provide you with the opportunity to save money on the overall amount you’re spending on a loan.
Decreases Number of Payments
If you want to shorten the length of time that you have to repay the personal loan (to reduce interest rates), switching to a shorter period of time will have your loan paid off faster. Keep in mind that this will change your financial situation and you’ll be expected to pay more every month for you to pay your loan off faster, but this will shorten the length of the loan term.
Pay off Loans That Are Due
Taken out a balloon loan and you don’t have the money to repay the loan by a specific date? While you may not have the funds immediately available, refinancing the loan will provide you with the funds that you need to pay back the balloon payment. As an end result, you’ll have more time to pay off the debt!
Refinance a Personal Loan
Deciding to refinance a personal loan offers many unique positive benefits. If you’re looking to take back charge of your financial health by paying off your old loans with high-interest rates, taking our a personal loan can help you to reduce the total amount that you end up spending on paying back a loan. Plus, you’ll be able to pay your loan off faster!
Have you decided that you want to refinance a personal loan? Bonsai Finance is here to help you! Go to their site to apply for a personal loan now.