Search

When To Refinance A Personal Loan : Also Learn How

You should refinance your personal loan only when it comes with some benefits, such as saving money. It is a great way to meet some urgent financial needs. Read on to know when and why you must refinance a personal loan!
When To Refinance A Personal Loan : Also Learn How
Refinance personal loan means a borrower replacing their current loan with a new one offering more favorable terms. Here's when and why you must refinance a personal loan.
In this article

Loan refinancing is a great way to pay off your debts and secure better interest rates. When you refinance a personal loan, you replace your existing loan with a new one to get low-interest rates, monthly payments, or a longer timeline to repay your loan. In this blog, we will explore when to refinance a personal loan and some benefits you get when you refinance a personal loan. Beem will find the best personal loan offers for you to help you stay on top of your financial management.

What Refinance Personal Loan Means?

Refinance a personal loan means a borrower replacing their current loan with a new one offering more favorable terms. Generally, individuals refinance personal loans to pay off their debts. A new, updated agreement replaces the terms of the original loan. This process allows the borrower to get a loan at lower interest rates or consolidate multiple debts into one simplified payment. A loan refinancing helps individuals enhance their financial situation and save money.

Can I Refinance a Personal Loan?

Whether you can refinance your personal loan depends on various factors. However, loan refinancing is only sometimes beneficial to a borrower. In this section, we will explore some key points that may affect your loan refinancing chances. Below are some of the factors that may affect your loan refinancing.

Creditworthiness

The lender will assess your credit score and history to check your eligibility for refinancing. A good credit score can offer better loan terms and lower interest rates.

Loan Repayment History

Lenders may check the loan repayment history of your current loan. A history of regular payments increases your chances of getting a loan to refinance.

Debt-to-Income Ratio

A debt-to-income ratio determines your monthly debt payments to your income. A lower debt-to-income ratio indicates a stable financial status and increases your chance of loan refinancing.

Outstanding Loan Balance

The remaining balance of your current loan may affect your loan refinancing options as some lenders may have specific requirements related to the minimum loan balance eligible.

Benefits of Refinancing a Personal Loan

Refinancing a personal loan can offer several benefits to a borrower, from reducing the burden of high interest to improving cash flow. Here are some key benefits of refinancing your personal loan.

  1. Lower Interest rates: A primary advantage of refinancing a personal loan is getting a new loan at lower interest rates.
  2. Lower Monthly Payments: By refinancing a new loan, you can get lower monthly payments due to lower interest rates or the extended tenure you get with the new loan. You can direct the free-up cash toward your other financial need or expenses.
  3. Debt Consolidation: You can use the fund you get from refinancing to pay off debts with higher interest rates. This way, you can consolidate your debts into one monthly payment.
  4. Shorter loan term: If your financial situation is better than when you initially took the loan, then you can opt for shorter loan terms by paying high monthly payments, which mostly go to the principal amount of the loan, saving you a considerable sum of money on interest on the loan.
  5. Improved credit score: By making timely repayment on the refinanced loan, you can improve your credit score, which may provide you with the option of a loan with better favorable terms if required.
  6. Flexibility in loan: Refinancing allows customizing your loan terms according to your needs. You can choose whether to pay a fixed or variable interest rate, adjust repayment schedules, or even options like grace periods and early repayment options. 
  7. Achieving Financial Goals: Refinancing can help you to achieve your financial goals. Whether you want to pay off your debt faster, save for a significant expense, or fund an important project or event. Refinancing can help you fulfill your financial goals.

When to Refinance a Personal Loan

You should refinance your personal loan only when it comes with some benefits, such as saving money. There are many scenarios in which saving money is possible. Here are some indicators which signal when to refinance your loan. 

  1. With a good credit score: If you have improved your credit score from the last time you took a loan, it’s a good signal that you should refinance your loan to get better interest rates.
  2. Switching to a fixed rate type: A variable rate type may make it difficult to plan your monthly repayment. Switching to a fixed rate type is a simple and consistent monthly payment.
  3. Balloon payment: Some personal loans require you to make huge payments toward the end of your repayment period. Refinancing can help you to avoid such a style of repayment.   
  4. Your income decreased: If you lost your job, you would want to reduce the amount of your monthly payments. Refinancing can give you the funds to meet your financial needs with lower monthly payments for extended periods. Note that this will not help you to save money but can reduce the burden of hefty monthly payments.

How Refinancing a Personal Loan Helps

Refinancing is a powerful tool offering more than favorable terms on your new loan. It can help you to meet your financial needs and goals. Refinancing gives you the funds for your financial requirement at lower interest rates, low monthly repayments, and longer tenure. With refinancing, you can improve your credit score and consolidate your multiple high-interest debts. An improved credit score can provide many options that offer favorable terms.

Conclusion

In a nutshell, refinancing is a great way to meet your financial needs. Refinancing allows you to get loans at lower rates, lower monthly repayment, and longer tenure. Before refinancing, check your credit score and history and carefully examine your financial situation to know when to refinance a personal loan. A good credit score provides many opportunities; you can refinance with your current loan provider or a new lender offering better terms. Compare different lenders and their offers with Beem and choose one that offers a term that suits your needs and preferences.   

Was this helpful?

Did you like the post or would you like to give some feedback? Let us know your opinion by clicking one of the buttons below!

👍👎

Author

Picture of Raman Gujral

Raman Gujral

An achievement-oriented professional, Raman has 10+ years of experience in B2B SaaS and B2C products across Fintech, Telecom, Digital Media, Social Media and Logistics domains. Defining and communicating product vision and strategy, product roadmap development, product positioning, and data analysis, he is also an expert in health insurance and personal loans content.

Editor

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

Related Posts

Can you Buy a Car with a Permit?
Can you Buy a Car with a Permit?
Can you purchase a car with just a learner's permit? While it is feasible to work out a bargain, registering the car in your name may provide difficulties. A driver's license is necessary to complete the purchase and registration. Let's plunge in!
Loans Like eLoanWarehouse
Payday Loans eloanWarehouse & It’s Alternatives [2024]
There is a range of options from established banks like Wells Fargo and Bank of America to new platforms like CashNetUSA and Beem, each with accelerated financing and changing qualifying requirements to meet your specific needs. Let us learn about these alternatives.
8 Payday Loans That Accept Chime
While Chime isn't a traditional bank, it offers similar features and sometimes more. As a result, lenders trust Chime enough to give payday loans on this platform. Let's look at them.
How Can You Reduce Your Total Loan Cost?
Can I Get A Payday Loan While In Chapter 13?
Payday loans are great when looking for quick access to funds. However, they come with considerable interest rates and negative outcomes. In most cases, you may not even get payday loans due to low credit scores and Chapter 13 Bankruptcy records. 
How Do I Get a Cash Advance from Albert?
How to Get a Cash Advance from Albert?
In this article, learn how to get a cash advance from Albert. Explore the process, insights, tips, and guidance to help you with any query regarding this financial option. Continue reading!
Features
Essentials

Get up to $1,000 for emergencies

Send money to anyone in the US

Ger personalized financial insights

Monitor and grow credit score

Save up to 40% on car insurance

Get up to $1,000 for loss of income

Insure up to $1 Million

Coming Soon

File federal and state taxes at low cost

Quick estimate of your tax returns

Get up to $1,000 for emergencies

Send money to anyone in the US

Save big on auto insurance - compare quotes now!

Zip Code:
Zip Code: