Refinance Personal Loan

What is personal loan refinancing?

Loan refinancing refers to the process of taking out a new loan to repay one or more outstanding loans. In most cases, a borrower can refinance personal loan as a way of getting lower interest rates. They can also do so to cut down on the amount of money they have to pay in the form of instalments.

If you are taking out a new loan to increase the period of time you have to make repayments, you should be aware that you are likely to pay higher interest rates due to the prolonged period you will take to settle your existing loan.

Can I refinance a personal loan?

The quick answer is that you can indeed refinance personal loan. However, you should do this as a way of achieving various fundamental goals as stipulated below.

Your credit score has improved

One of the most important reasons why you should think of refinancing a personal loan is an improved credit score. If you took out a personal loan at a time when your credit score was not good, chances are that you may have received a loan with unfavourable terms. By refinancing your loan, you can negotiate better terms, and in the long run, you might just end up paying lower interest rates.

Switching your rate type

Some personal loans Australia offer you variable interest rates. That means you might end up paying more than you would like to. By refinancing such loans, you are able to negotiate a fixed rate. This will ensure that you can calculate a predictable figure that you will be able to pay off over a given time.

To avoid a balloon payment

Some personal loans require you to pay a balloon amount at the end of your repayment cycle. A balloon payment is a large sum of money that needs to be paid in a lump sum. Refinance personal loan allows you to negotiate such payments and can save you from the stress of spending a lot of your money on a single payment.

Your income has decreased

In the unfortunate event that you have lost your job or experienced a pay cut, it may not be possible for you to keep paying your monthly instalments. Instead of defaulting on your loan, refinancing may be the ideal solution. In such a case, you are not really going to save on cash. However, you can get more time to finish paying up your loan. This can work positively for you because it ensures your credit score remains positive.

You want to pay off your loan faster

Sometimes you just want to finish paying up your loan because you have either received an increase in income or you are no longer interested in pursuing long term loan repayment. In such a case, you can refinance personal loans for larger monthly payments. It is worth noting that such an arrangement may end up saving you quite a considerable amount of money that would otherwise have gone into paying your interest rates.

How often can you refinance a personal loan?

Technically, you can refinance personal loan as many times as you get approved. However, refinancing is not always the best option unless the factors mentioned above are in play.

Does refinancing a personal loan hurt your credit?

When you refinance personal loan, you are immediately subjected to a credit check. This can lower your credit score by a few points. However, the drop is often temporary. If you can practice exceptional financial behaviour with your new loan, then the drop in your credit score should resolve relatively fast.

The key is to understand that your score takes a hit any time you take out a loan or use a credit line. However, if you can make repayments on time, your score will quickly improve and even look much better over the long run.

How to refinance a personal loan?

Here are some of the steps you should take when thinking of refinancing a personal loan.

How much money do you need?

The first thing to do is figure out how much money you need to carry out a successful refinance personal loan. To get a good picture, talk to your lender about the options they are offering. Ask about prepayment penalties and possible interest rates on the new loan. This will help you determine if refinancing is a good option or not.

Consider your credit score and credit report

A look at your credit score and credit report can let you know if you qualify for better loan terms. If your new personal loan interest rates are not significantly lower than the current, it may not be a good idea to refinance. However, if there is a significant change, then you should go for the refinancing option.

Compare lenders

There are different lenders on the market, and comparing each one depending on the terms and interest rates they offer can be key to settling on the most ideal. Ozzie Loans is particularly one of the most reliable institutions when it comes to providing cash loans online. You can even take advantage of the firm’s personal loan calculator to understand some of the figures that will be involved once you take out a loan.

Apply for the loan

Before submitting your application for a loan, be sure to verify your personal loan eligibility. Ozzie Loans requires that you must have attained the age of 18 and be a permanent resident of Australia. You should also show proof of having a stable income. The process of application is relatively easy since you can do it right in the comfort of your own home or office, thanks to the online application option.

Start making payments

Once you have received the funds in your account, start making payments for your outstanding loan. This should be done as soon as possible to avoid accruing interest rates that may come as a result of late repayments.