Refinancing a personal loan refers to getting a new loan to pay off an outstanding loan. Generally, it is considered to get funds at a lower interest rate. Borrowers consider refinancing a viable option to decrease the loan EMI (Equated Monthly Instalment). Individuals can get a personal loan at better terms, lower lending rates, and increased repayment tenure.
When To Consider Refinancing a Personal Loan
Borrowers can find the personal loan refinance option beneficial in the following cases:
- The borrower can refinance the personal loan if they find a lender offering attractive interest rates on personal loans.
- Refinancing a personal loan is beneficial when the borrower’s credit score improves.
- The borrower can refinance their loan if they want to change or remove the co-guarantor from the loan account.
- If the borrower finds switching the interest rates from fixed to variable can refinance the loans.
Key Things to Consider – Calculate Savings in the Overall Interest Cost
- Foreclosure Charges: One of the expenses associated with refinancing is the foreclosure fee. This fee is paid to the existing lending institution as the borrower closes the loan account with the lender before the end of the tenure. Check what you need to pay to close the account and refinance the loan.
- Processing Fees: The new lender is opening a new account. There can be a processing fee to process the new loan. So, it is necessary to ask the lender about the processing fee.
- Interest Rates: The primary objective of personal loan refinancing is to reduce the EMI burden with a lower interest rate. Check how much cost the offered interest rate by the new lender can decrease the loan cost. An online personal loan calculator available on the lender’s website can determine the overall savings with refinancing.
So, personal loan refinancing is the choice of most borrowers who want to reduce the EMI burden. Make an informed decision using the personal loan calculator for the maximum cost benefit from personal loan refinancing.
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