A personal loan comes handy for anybody who thinks of addressing versatile expenses with the help of the loan. These loans are easily available to the people without the need for pledging any security. Easy and quick processing from the lenders makes them an attractive loan option. The interest rates on these loans stand between 12% to 24% which is worrying factor for many borrowers today. If you are borrower thinking that you are paying a high rate of interest for the quick loan that you have taken from the lender during the times of emergency, considering personal loan refinancing is one wonderful option on your table. At his juncture, it is important for the borrower to know some important aspects about refinancing loan before considering one.
IsPersonal Loan refinancing a Good Option ?
Refinancing is an option that allows to transfer the quick loan from one lender to the other with the aim of reducing the interest rates, change the loan terms and much more. In the process of refinancing, you will pay off the loan existing with the current lender with the help of the new loan sanctioned by the new lender. Doing so will make you the borrower of the new lender with fresh terms and you can comfortably close your only by paying it in monthly equated instalments.
Factors to look in
Most of them commit a mistake of looking at the interest rate reduction while personal loan refinancing is considered. There are many other fees like prepayment penalty, processing fee, loan tenure that should be look in while considering the option. The cost you incur for refinancing the quick loans might not gain you anything in spite of refinancing the cash advance loan.
When is it right to refinance personal loan?
- When you approach the new lender with a request to refinance cash advance loan, negotiate the interest rate to the maximum to benefit the most from refinancing the loan.
- Enquire about the prepayment penalty of the old lender and processing fee of the new lender before making a choice.
- You should conduct a cost-benefit analysis by considering the charges you incur to refinance the loan and interest amount you gain by doing it. If the benefits outweigh the costs, cash advance loan refinancing can be a right option for you.
- You might have availed the cash loan during the times of emergency with the old lender without considering the terms of the loan. Check if the new lender is providing flexibility to restructure the loan and you are comfortable with the options given.
- Check if the new lender is offering the loan at floating or fixed rate of interest and know the period for which the rate of interest is calculated.
- On whole, go for refinancing if the EMI of the current loan is less than old loan.