If you’re having trouble paying off your personal loans and are looking for a simpler and quicker way, refinancing may be a good option for you.
When you refinance, you replace your current loan with a new one, usually resulting in a better interest rate and long-term savings. This will help you achieve your debt payoff goals faster!
At Debt Busters, we can help you decide which solution is right for you and negotiate with your creditors so you don’t have to.
What Is Loan Refinancing?
The process of personal loan refinancing is when you move your debts from an existing loan to a different loan or lender. You’ll take out a new loan, preferably one with better terms and then you’ll use this loan to pay off your previous debt, potentially combining multiple debts into one new loan.
This process is similar to a mortgage refinance in that it’s usually a better deal in the long run. In addition, some personal loans are intended to be used for consolidation. They might even organise the funds to be paid directly to your lender without you needing to take extra steps.
Can You Refinance a Personal Loan?
You can refinance a personal loan, usually with another personal loan. As long as you’re eligible to be approved for a new loan or line of credit, you can refinance any old personal loans by paying them off with a new loan.
Refinancing a personal loan is a good idea even if you’re not struggling with repayments. You might just want a better deal or interest rate, and that’s a great reason to consider refinancing.
Why Refinance Your Personal Loans?
The main reason to refinance your personal loans is to lower your interest rate and your monthly payments. If you’re not currently seeing as much progress as you’d like on your debt payoff, this might be the right strategy for you. Here are all the reasons why you might consider refinancing:
- Save money – As we’ve mentioned already, the main reason to refinance is to save money. Facing high-interest rates and fees can get in the way of your payoff goals, so refinancing with a better deal can save you considerably.
- One payment – If you have multiple personal loans, these can be hard to keep track of. Missing a payment could negatively affect your credit score, so consolidating with a single personal loan will give you a single, easy payment will keep you on track.
- Faster payoff – Ultimately, better loan terms will help you pay off your debt faster. This moves you one big step closer to your financial goals!
However, it’s important to understand any fees and charges that are involved in refinancing to determine if this will actually help you pay off your debts any faster. It’s not an inexpensive process to start, so you want to make sure you know what you’re getting into.
Our financial experts at Debt Busters can assess your unique situation to help you determine if this is the best strategy for you.
How to Refinance a Personal Loan
If you’ve decided refinancing is something you want to pursue, there are a only few steps to take. First, you should take a look at your credit rating to make sure your finances are in good standing. A better credit score will make it easier to qualify for low-interest personal loans.
Next, you can start the application process. Be sure to shop around for the best deal, keeping in mind the costs and fees associated with refinancing.
Once you’ve been approved, it’s time to use the new loans to pay off your current loan (or loans). Finally, be sure your old loan is closed and get this in writing. Now you’re ready to start making payments towards your new loan.
Steps to Pay Off Your Personal Loan
Whether you choose to stick with your existing loan or loans or refinance, you need a strategy to pay off your personal loan within a reasonable timeframe. The longer it takes to pay off your loan completely, the more you’ll pay over time.
Here are the steps to pay off your personal loan:
- Set payment reminders – It’s a smart idea to set reminders or alerts in your calendar to ensure you never miss a payment.
- Create a monthly budget – Make a monthly budget for your income, expenses, and debt repayment. See if there are any areas of your budget you can cut back on to afford more debt payments towards your personal loans.
- Hold yourself accountable – Enlist friends and family to keep you accountable. Inform them of your debt payoff goals and let them support you during this process.
- Read the fine print – Finally, make sure you read the fine print on your personal loans to ensure you’re not missing any hidden fees or costs.
Need help getting started with your personal loan repayment? Debt Busters are here to help. We can help you build a budget and plan strategies for paying off your debt faster.
Other Options To Pay Off Your Personal Loans
Aside from refinancing, there are several other options to consider to help you reclaim control over your finances. Here are a few debt solutions to consider:
- Debt consolidation – Depending on your level and type of debt, consolidating with a personal loan or mortgage refinance could save you thousands over the term of the debt.
- Informal payment arrangement or debt agreements – If you’re not eligible for debt consolidation, an informal payment arrangement or formal debt agreement could help you rearrange the terms of your debt with your creditors, potentially reducing your overall debt.
- Short term loan – A short term loan can help make your next payment more manageable, giving you the peace of mind you need to move forward.
If you’re not sure how or when to refinance your personal loans, then let the expert team at Debt Busters help you today by calling 1300 368 322. Otherwise, request a call now and we’ll be in touch shortly to discuss your overall financial situation and options.