\n
Not exactly. Although they work the same way, consolidating involves paying off multiple loans at once, while refinancing only deals with one loan.<\/p>\n <\/div>\n <\/div>\n<\/div>\n
When should I refinance my personal loan?<\/h3>
People choose to refinance their personal loans for many reasons, but it can make sense to do so in any of the following circumstances:<\/p>
You have found a better deal that you are eligible for<\/h4>
If you think you’ve found a better deal, consider using a personal loan repayment calculator to compare the 2 loan options and see if the move is worth it. When comparing loans, focus on interest rates but also look at ongoing fees and repayments as well as loan establishment costs. You could get a better idea of the loan’s total cost by evaluating the APR. Consider the loan’s features to make sure it suits your needs \u2013 for example, if you\u2019d like the freedom to pay off your loan early, confirm there is no early repayment penalty.<\/li>
You want lower monthly repayments<\/h4>
If you would like to pay less each month on your personal loan, you could refinance it to extend the repayment period. Simply find a loan with a longer term. Once approved, you can use those funds to pay off your existing personal loan and then enjoy paying less each month on the new one. However, be aware that a longer term usually means paying more in interest over the loan’s life.<\/li>
Your credit score has improved<\/h4>
If your credit rating has significantly improved from the time you first applied for your loan, you might now qualify for much better interest rates, so it could be worth refinancing to a cheaper loan.<\/li>
You want to top up your loan<\/h4>
If you have an existing loan but are interested in borrowing more, you could refinance to borrow the extra funds rather than take out a second, separate loan. To do this, you\u2019ll need to apply for a new loan for the remaining balance and the extra amount you want to borrow. You then pay off your existing loan and start making repayments towards the new, larger loan. Be aware the new loan may have a different interest rate and term from your initial loan, so this might not always be the most cost-effective solution.<\/li>
You want to take a break from repayments<\/h4>
Some lenders offer loans with repayment holidays for the first 2 months. This means you won’t have to make a repayment for the first 2 months after your loan is approved. If you need a temporary respite from making repayments, one way to do it would be to refinance to a new loan that offers a repayment holiday. However, interest will still build up during this time.<\/li>
You want to save on interest by paying it back sooner<\/h4>
If you’d like to save on the interest you pay on the loan, you could refinance it to shorten the repayment period. Simply find a loan with a shorter term. Keep in mind that a shorter term will mean higher monthly repayments.<\/li><\/ul>
How to renegotiate a personal loan<\/h3>
Like the lender you’re working with? Another way to get better rates and terms is to renegotiate your personal loan with your current lender. Follow these steps:<\/p>
- Check your credit score and report.<\/strong> You can find out your credit score by using any of the free credit reporting agencies available online. Check your credit report for errors to make sure your score is accurate. If you have good credit, you\u2019re more likely to be successful with your negotiation.<\/li>
- Reread the terms and conditions.<\/strong> Before reaching out to your lender, read your terms and conditions one more time to make sure nothing is preventing you from renegotiating your loan. If there is, refinancing might be a better option.<\/li>
- Pre-qualify for the competition.<\/strong> One way to strengthen your argument is to come to your lender with a counteroffer from another lender on a refinancing loan. If your lender thinks it could lose your business, it might make you an even more competitive offer.<\/li>
- Talk to your lender.<\/strong> This could take some time. Typically, the higher up the person you are speaking to is, the more likely you\u2019ll be able to negotiate a change. You can start by calling customer service and asking to speak to the representative\u2019s manager until you\u2019re on the phone with someone who has real power. Make sure you make notes of everything that has been said.<\/li><\/ul>