You can use a personal loan to consolidate debt, make home improvements, cover unexpected medical costs, and much more. If you already possess a personal loan, you may run into situations in which you want to refinance. You may require a lower monthly fee, or you may want to find out if you can find a lower rate of interest.
So the question arises “Can you refinance a personal loan?”. The short answer is “Absolutely Yes!”. The procedure to refinance your loan is quite much like the process you used to get your personal loan in the first place. All you need to do is applying for a new personal loan that’s the same or more than the balance of your present loan.
Your current personal loan will influence your refinance possibilities. This is because your existing loan will impact your credit rating and credit history and that many lenders review when they are considering whether or not to approve you for a new loan. If you are behind on your payments in your personal loan, it may make obtaining a new loan more difficult. It is not impossible though, and several creditors are willing to work with those who have poor credit.
When Should You Consider Refinancing?
Several situations might lead you to wish to refinance financing.
- Your credit may have enhanced, and that means you would like to find out whether you can find a better rate of interest.
- You may have new invoices you want to consolidate into a single loan.
- You might choose to make higher monthly payments so you can pay your loan off faster.
A few of the advantages of refinancing a loan include saving money, possibly getting a lower interest rate, or multiplying just how long you have to pay back your loan.
You may have the ability to be eligible for a higher loan, so you can consolidate different bills or get a loan with better terms. For instance, if your current loan has a variable speed, you may want to look for one which has a fixed rate. With a variable interest rate, your monthly payment amount can change.
You may not want to refinance in case your credit situation isn’t as good as it was when you started. There are strategies you can use to compensate for a bad credit rating, though.
You are entitled to a free credit report per year from each of the major credit reporting agencies. The three big credit reporting agencies are TransUnion, Experian, and Equifax.
Most creditors use a mixture of your credit rating and credit history to decide about whether to approve you for a loan. Your credit history can also affect the total amount of your loan and the conditions of your loan. If your credit isn’t great, though, you may still have choices available, so don’t lose hope.
How to Refinance a Personal Loan?
Boost Your Credit
Once you know your credit score, you can take steps to improve your credit before you apply for a loan. To boost your credit rating, you should take the time to assess each of your credit reports carefully. Do not assume that if a single report is fine, the other ones are too. Every provider is separate and gathers information by itself; therefore it is possible for there to be a mistake on one report that doesn’t show up on the others.
If you’ve been having trouble making payments with among your creditors, contact them to work out a payment program. Many lenders are prepared to become more flexible.
If you can, you might choose to pay down your credit balances. Because if your credit cards are maxed out, then it has a negative influence on your credit score.
Get Quotes from Lenders
Once you think that your situation is good enough to refinance, you can start getting quotes from the lenders. Before you get quotes, you ought to have a sense of just how much you can afford to pay each month.
An efficient way to see your loan options from multiple lenders is to use TCALoans.com personal loans marketplace. By filling out a simple, quick form online, you can check your rates easily. Don’t forget, you are under no obligation to accept any loan offer. Make sure you’re clear on the total amount of the loan being provided, your interest rate, your monthly repayment amount, and the length of time you’ll be paying.
Do not be afraid to ask your lender questions when things are unclear. You might want to ask whether there are any penalties for paying off your loan early, for example. Also, it is better to ask if there are any hidden charges.
Another option if you are not pleased with your loan options is to contact your current lender. Your lender might be prepared to work with you to change your loan terms.
Apply for a Loan
Once you have an offer you are comfortable with, you can proceed to the final step about how to refinance a personal loan. Your offer is based on the information you gave to get a quote; however, when you apply for the loan with the terms, the lender will make a final decision regarding your loan. Be sure to fill out your application with accurate information. You may have to show documentation of your income. This might consist of pay stubs or a recent tax return. Also, you might need to give evidence of your identity, like a driver’s license.
Pay Off the Previous Personal Loan
Once you’ve received your money, you must pay off your refinanced loan using the cash from the new loan. Follow-up together with the lender to make sure your balance is cleared. Keep a written verification for your records. The last step you need to take when you want to refinance your loan is checking the credit report to make sure it reflects that your previous loan is closed. If there are inaccuracies, report them to the credit reporting agency with a copy of your confirmation letter.