It is essential to have a stable financial history and standing. So, when it comes to refinancing, is it that necessary to settle your personal loan? Or does it affect your financial status?
The key is to find out when refinancing is required.
1. When You Are Not Able to Afford Loan Repayments
At times, it is quite possible that you miss your payments due to financial crunch. Such a situation may result in late payment of the instalment amount. Late payments does incur penalty charges, which would be an additional burden to your existing financial situation. This is when you can opt for refinancing to settle your current loan quickly. You would get a new repayment tenure and instalment amount. It will also help protect your credit score.
2. When You Want To Avoid Paying High Interest
Even if you have opted for a personal loan with fixed interest rates, it is still possible for the rates to dip lower due to market fluctuations. You may find that new loans are being offered at low interest rates when compared to the rates you are paying on your current loan.
You can save money on your payable interest if you get refinancing with lower interest rates.It will make your monthly payments affordable, and help you clear your loan quickly.
3. When You Want To Change Your Loan Tenure
You may want to increase or decrease your current loan tenure for any number of reasons. Since it is not possible to change it on an existing loan, a refinance would work better. You can opt for a tenure of your preference, or a tenure that is ideal for your financial needs.
4. When You Need Extra Funds
At times, due to some unexpected event, you may be in need of funds. At such times, refinance works in your favour. You can get refinancing that will pay off your current loan, and give you the much needed funds.
Benefits of Refinance
- Pay low interest rates and save money.
- Protect yourself from becoming a loan defaulter.
- Change the loan tenure according to your need.
- Get access to extra funds during emergencies.
- Avoid paying penalty charges for late payments.
Keep in Mind
- Refinancing would affect your credit score to an extent.
- Regular payments are required on the refinancing as well.
- A good credit score is required to get refinancing.
Remember, refinancing is good when it helps you. If refinancing is going to drown you more in debt, then it is better not to opt for it. Also, if your main purpose to get refinancing is to just settle your loan because you cannot afford it, then check for other sources of funds to repay your loan. Go for refinancing only if you do not have other options.