A personal loan can provide you with urgent finance in your moment of need. You can get a personal loan online or offline whenever your funds are inadequate for your expenses. To apply for personal loan, all you need to do is check your personal loan eligibility. But, have you ever taken out an instant personal loan only to realise that it is more expensive than what you predicted? If yes, then refinancing your loan on better terms can be an escape route.
Can You Refinance a Personal Loan?
If you are thinking about whether ‘can you refinance a personal loan or not’, the answer is yes. Refinancing a personal loan implies paying off your existing personal loan with a new one that offers better terms, such as a lower interest rate or monthly payment. When you refinance a personal loan, your new lender will take over the loan from your current lender, and you will then start paying future EMIs to the new lender.
When to Go for Personal Loan Refinancing?
- You have a better credit score
If there has been an improvement or a jump in your credit score since you initially took out the instant personal loan, you can opt to refinance your loan to avail better terms. If your credit score has improved, then many financial lenders may offer you better deals on interest rates, etc., thereby making personal loan refinancing a good option.
- Getting an attractive rate of interest offer
Before you apply for personal loan, go through lender ROIs and compare personal loan interest rates to choose the one that seems perfect for you. If after due research for an instant personal loan, you feel that your current lender’s ROI is high as compared to another lender, go for personal loan refinancing. Opting for a lower interest rate will allow you to make lower EMI payments to pay off the loan amount.
- You want to delete the co-applicant
Due to bad credit history, you might have added a co-applicant while getting a personal loan initially. But, if things have improved now and you no longer need assistance from your co-applicant, personal loan refinancing allows you to take the co-applicant off the loan and free them of their responsibility. When you opt for personal loan refinancing, you will have a new set of terms and conditions wherein you can remove your co-applicant.
- You want to lower your loan repayments
If your EMI payments are taking a considerable portion away from your monthly budget, you can opt for personal loan refinancing. Refinancing also allows you to extend the repayment tenure on your loan so that you can lower your monthly EMIs. However, keep in mind that extending the tenure would also mean higher overall costs as the personal loan will spend more time accumulating interest.
Final Thoughts
Research is crucial when it comes to personal loan refinancing. Some lenders might offer lower rates or different terms than your current lender. But, there may be hidden fees added to the cost of the loan, making it a less than perfect deal.
Therefore, always check different lenders’ offerings and compare them thoroughly. Also, use a personal loan EMI calculator to see how much a new loan could cost you. Doing this will help you understand your repayments better.