Having debt is a reality for most Australian households, borrowing from banks, building societies and the private lending sector. Along with Home Loans, Car Loans and credit cards, Personal Loans are one of the most common forms of financing in the country. Every day, Aussies take out Personal Loans to cover a wide variety of individual needs, from home improvements to vacations, education, and even weddings.
There might come a time when the borrower wishes to refinance, and it’s refinancing and the advantages that we are going to take a look at in this post.
What Is Refinancing and How Does It Work?
Refinancing a loan generally enables the borrower to rewrite their current loan. It’s quite common with Home Loans and Personal Loans. Refinancing can be done through your current lender or a new lender.
The way things are done when it comes to refinancing can vary from lender to lender, so be sure you fully understand what’s involved before going ahead with it. Check the fine print and don’t be afraid to ask questions if you’re not sure of something.
Ultimately, you are trading in your current loan for a new loan, and in the next section, we will take a look at the reasons why you might want to consider refinancing your existing Personal Loan.
Why Would You Refinance Your Personal Loan?
One of the most popular reasons to refinance is to get a better deal. Let’s say you currently have a Personal Loan with a bank and the repayment period is 5 years. You’re about 2 years into your Personal Loan and, out of curiosity, you decide to research Personal Loans again, only to discover that the interest rates and repayment terms are far more favourable than when you first took out your loan.
It’s only natural that you would feel a little annoyed that your loan is costing more than a loan would if you applied today. Well, when you refinance with a new loan that takes over your original loan, you can take advantage of any potential cheaper interest rates.
Refinancing is also a common option for people with Personal Loans when they decide they need some extra cash to cover the cost of something else. For example, you may have borrowed $20k for some home improvements. You’ve spent all the money and a year or two down the track there’s something else you want to do around the house, but you don’t have the money to cover it.
With some lenders, you can refinance your existing Personal Loan with a new one that includes the extra cash that you need, along with revised loan terms and the repayment period. Now, you’ll have the money you need for the added renovations, with a new loan that encompasses this extra amount, including the unpaid portion of your previous Personal Loan.
This way, you only have one loan to deal with instead of two.
You might also wish to consider refinancing if you want to consolidate the debt you’ve accrued on several credit cards, rolling it all over into one simple loan that saves you money on monthly repayments and interest rates. This type of loan is called a Debt Consolidation Loan and is great for simplifying your finances.
How Often Should You Refinance Your Personal Loan?
While there is no set limit on the number of times you can refinance a loan, you’ll only want to do so when it makes logical financial sense. As an example, there’s little point refinancing if the new deal is going to cost you more than your existing loan terms.
You may find that some lenders have restrictions on when you can refinance, for example, a mandatory waiting period.
How often you refinance really depends on your personal circumstances and needs, but be sure to put a lot of thought into refinancing before going ahead with it. Don’t simply do it just because it’s an option.
Talk To Cashify About Refinancing
Cashify is your fast cash loans and refinancing specialist. If you’re in the market for a Personal Loan or wish to refinance your current debt, give us a call and have a chat about your requirements with our friendly staff. We just may be the lender you’ve been looking for.
Disclaimer: Please note this content is of general nature only and does not take into account your personal objectives, financial situations or needs. For advice tailored to your financial situation, it is advised that you seek guidance from an accountant or financial advisor. The information contained in this article is correct at the date of publication.