When and How to Refinance Your Personal Loan

| Updated
by Maria Konash · 3 min read
When and How to Refinance Your Personal Loan
Photo: Pixabay

Since we can’t always predict what our life has in store for us, and circumstances may change in a blink of an eye, which comes especially important when you’re paying a personal loan, it’s wise to consider several possibilities for its refinancing.

Your situations may change while you’re still paying back a personal loan, and renegotiating might be a smart option if you discover the credit isn’t a meeting your expectations.

There are a few circumstances where you may consider renegotiating a personal loan. You may require access to more credits, for instance, or need to consolidate debt. Or on the other hand, you could be ready to negotiate a better deal.

Whatever your reasons or circumstances for wanting to refinance your personal loan, it’s good to consider all your options so you can settle on a decision that is best for you.

Consolidating Debts

If you have several other debts – Perhaps spread over two or more credit cards as well as a personal loan, for example – and you would like to merge them all into one debt, and then refinancing your personal credit may be a smart decision. By combining all your debts, you’ll only need to make one regular repayment, and this can help you a great deal in better management of your cash flow. Also, you may be able to save on interest and facilitation fees.

Getting More Funds

There are circumstances where you may need to borrow more cash than you initially thought when you previously took out an advance. In such a case, refinancing your personal loan may not be necessary – creditors like Asteria Lending, for example, can provide you with the option to increase your personal loan amount. However, you should remember that raising your loan amount may also mean an increase in the loan and repayments terms.

Changing Your Credit

Evaluating which part of your loan needs adjusting is a great place to start when considering whether renegotiating is necessary. Check with your creditor if you can change your repayment amount deadline – if this is possible then you do not need to refinance your existing loan or take out a new credit.

However, refinancing may be necessary when wanting to change your loan provider or cut back on the interest rates you’re currently paying. Before getting into a financial agreement with a new lender, always ensure that the new loans cover all needs and requirements.  

How to Refinance Your Personal Loan

  • Step 1: Do Your Homework

To ensure that renegotiating your personal loan is the best option, research the following:

–    The break and exit fees of your current loan compared to the new credit

–    How much is the startup fees for the new loan?

–    What’s the cost comparison on the interest rates between your current loan and the new loan?

–    What are the repayment penalties of your new credit?

  • Step 2: Apply For Your New Loan

Once you’ve figured out the costs, apply for the loan with the most long-term savings.

  • Step 3: Payout the Current Personal Loan with Funds from the New Credit

You may have to pay off the loan balance of your old loans to close the account so that you can proceed with your new lender.  However, some lenders may allow you to consolidate your remaining debts with your new loan for monthly repayments.

  • Step 4: Ensure Your Old Loan Accont Is Closed

Finally, you want to ensure that the old account is paid out and officially closed.

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