A Simple 5-Step Guide to Refinancing Your Personal Loan
Sometimes, personal loans can become expensive depending on how much you borrow and the interest rate at which you borrow. However, an increase in your credit rating or improvement in your general financial situation could easily change that.
If you have previously taken a personal loan and now you think that you could lower your monthly payment or get better interest, you need to consider refinancing.
But, before you jump in, you need to understand how the entire process works and whether the new loan will help you save money in the long run. We have compiled a simple five-step guide that you need to follow while refinancing your personal loan.
Improve Your Credit Rating
Before you even start thinking of refinancing your personal loan, you need to ensure that you do everything possible to improve your credit rating. This is critical since the interest rate that will be charged on your new loan depends on your credit score.
Your lender will review your credit report to make sure that you are a safe candidate for refinancing. Demonstrating that you are an ideal candidate for refinancing will go a long way towards the lender’s willingness to offer you a new loan with better terms.
Therefore, improving your credit is one of the most crucial things that you need to do if you are thinking of refinancing your personal loan Montreal debt.
Compare Your Options
Before you sign that new loan contract, take your time to review several lenders against your current one. You need to keep in mind that although some lenders may offer lower rates, there may be other hidden fees that add to the cost of loan making it expensive to pay back.
Check to see if your current lender offers a refinancing option. If it is there and you are happy with the terms, it could be a good way of refinancing your existing loan without spending time applying for a new loan elsewhere.
Consider Any Refinancing Costs
The truth is that the reason why many people choose to refinance their personal loans is that they want to save money in the long run. Therefore, you need to be careful to ensure that you don’t miss the target.
While refinancing may seem like it is saving you money in the short-term, it could still end up costing you more.
Take your time to evaluate everything and be sure that there is no any additional fee such as application fee, ongoing service/account fee, or exit/early termination fee that may make the new loan much more costly in the long run.
Check this information with the lender and be satisfied before you proceed with the refinancing.
Make a Decision on Whether to Refinance
Once you have gathered sufficient information, it is time to decide on whether you need to refinance your personal loan Montreal debt or not. If you think that refinancing is the best thing to do, proceed and apply for that new loan with better terms.
Use the money you get to pay off your current loan and make sure that you stick to a repayment plan and make timely monthly payments to help improve your credit score further.
Contact your current lender in advance to know the full payoff amount. Sometimes, you may be required to pay a closing fee that may add up to hundreds of dollars to your final loan balance.
Close Out Your Original Loan
Whether you pay off your old lender directly or your new lender does it on your behalf; you need to make sure that your old account is closed. If you don’t receive a confirmation letter or email, don’t be afraid to contact your lender and inquire if the account isn’t closed within a few days.
You can also check your credit report to determine if the old account was closed- it should be recorded as closed on your report.