What is Refinancing and when to Refinance your loan ?
Refinancing is nothing but a process of replacing your current loan with a fresh one but has to follow some terms. Simply we can say, the new loan you borrowed will pay off your recent debt. The newly borrowed loan contains good terms or features that enhance your financial condition. Well, refinancing takes time and a bit expensive. You may not find such same and fascinating features and terms ion your current running loan.
Reasonable Interest Rate
Navigating to refinancing option will let you save money on interest costs. You just need to refinance into a loan which grasps reasonable interest rate and that rate will surely lower than your current loan.
Choosing a refinancing option will make you pay lower monthly payments. Simply it leads to simpler money flow management and won’t make you face different monthly expenses. Availing refinance means your clock hits the restart option and you expand the sum of time you will fetch to return your loan. You might see your balance is almost equal to your original loan balance, but you have more time to pay your loan with lower monthly payments.
Pay your debt more quickly
If you don’t want to expand your repayment then you can simply refinance into a shorter term loan. For example, if your home loan’s tenure is of 30 years then by refinancing it you can convert it to 15 years. This option is actually a savior, what else you need when you can rid of your debt instantly.
Multiple Loans into a single loan
If you’re running with multiple loans then refinancing might be the best option which can help to consolidate those loans by converting them into a single loan with the lower interest rate.
Stable your financial status
As we know if any financial related pros or cons touch your income, it would automatically affect your EMI and credit score. If somehow your monthly income has touched sky then refinancing your loan is the finest option. It will offer you a long tenure but with lower EMIs. If you’re on the phase where your financial position has enhanced then you can step ahead to refinancing option. It will help you quickly pay off your debt.
You won’t see a change in these things after refinancing:
No change in loan balance
If you think after selecting a refinancing option, you will see any change in your loan balance then it not going to happen. But yes you will pay the lower monthly payments with long tenure.
If your previous loan was secured then your security or collateral will still be at stake for the loan that you will take. Suppose, if you choose refinancing move for your Home Loan then you could still lose your home in foreclosure if you’re unable to make payments.
No change in payments
You won’t see invisibility in your payments after refinancing. Your monthly payments will be there but with refinancing option, you will pay lower monthly payments.
Take a glimpse
- If you’re thinking to refinancing, then switch the loan while your tenure is at early stage.
- You can gain clarity on processing fee, valuation fee and other charges. In case if you go for a new loan then these charges and fee will be applicable.
- When it comes to you loan payments then maintain an accurate record is essential. If your record is clean and appropriate then while refinancing your loan, you will get the quick approval.
- If you’re first time refinancing your loan from the new bank then for that specific bank you are a fresh applicant means you have to go through the regular procedures.