Every year, more than 10 million Americans take out personal loans.
Whether they’re using them to make ends meet or to finance an emergency expense, a lot of people who take out personal loans find later on that they have a hard time paying them back.
Does this sound familiar to you?
If you’ve been struggling to pay back your loan, or if you feel that you’re paying more in interest than you should, you may want to consider refinancing. Refinancing allows you to adjust your loan term or loan value to better suit your needs.
Read on to have all your questions about adjusting your loan term or loan value answered.
Reasons to Adjust Loan Term or Value
There are lots of reasons to consider refinancing a personal loan. The following are some of the most popular reasons:
You Can Get a Better Deal with a New Lender
Often, people will look into refinancing a personal loan when they’ve found a better offer from a different lender. Maybe the lender offers loans with lower interest rates or better overall terms.
If you find a lender with a better offer, you can save a lot of money by refinancing to work with them instead.
This is why it’s a good idea to be on the lookout for the best personal loans. You never know when you’re going to find a great offer.
Your Credit Score Has Improved
If your credit score has improved since you first took out your loan, you definitely should look into refinancing. A higher credit score could help you get a lower interest rate and lower your monthly payment as a result.
You Want Lower Monthly Payments
Speaking of lower monthly payments, who doesn’t want to save money each month? Refinancing helps to lower your monthly payments so you get to keep more money in the bank where it belongs.
You Want a Different Type of Interest Rate
In addition to changing your interest rate, refinancing a loan can also allow you to change the type of interest rate you currently have.
For example, if you have a variable interest rate on your loan, you might be able to switch to a fixed one. The opposite is also true.
Assess your situation and consider whether or not a different type of interest rate would be more beneficial to you and your finances.
You Want to Get Rid of a Co-Signer
Maybe, when you originally took out a loan, you need a friend or family member to co-sign for you. If you’ve raised your credit score since then, you probably don’t need them anymore.
Refinancing your loan allows you to take away that responsibility from co-signer and prove that you’re responsible enough to handle a loan on your own.
How to Refinance a Personal Loan
Do any of the situations listed above apply to you? If so, then you might want to consider refinancing your loan. Follow these steps to begin the refinancing process:
Boost Your Credit Score
If you’re interested in refinancing your loan, you first need to check your credit score and make sure it’s higher than it was when you first applied for a loan. This will give you more leverage when it comes to renegotiating your loan terms, and it’ll help you get better rates and terms.
Now, it’s time to start shopping around for the loans with the best rates and terms. There are lots of online tools that allow you to compare different loans from different lenders and find the best option for your specific needs.
Get Multiple Quotes
Be sure to get quotes from a few different lenders. This makes the comparison process easier.
It also gives you additional leverage if you want to stay with your current lender. They may be willing to lower your interest rate or give you better terms if they see that you’ve gotten better offers from their competitors.
Prequalifying is a good way to shop for credit and find out what kind of loans you qualify for, but you don’t have to worry about your credit getting dinged from applying for multiple loans at once. It lets you gather the information you need in a low-risk way and decide if refinancing is a good option for you right now.
After you’ve done your shopping and found a good offer, it’s time to apply for refinancing. Most lenders make it easy for you to do this and will get back to you right away to let you know if you qualify.
Tips for Renegotiating a Loan
If you’re getting ready to renegotiate your loan terms with your current lender, you’ll need to be strategic about it. Here are some tips that will help you increase your chances of getting the new loan term or loan value that you want:
Check and Correct Your Credit Report
Start by checking your credit report. Look at it carefully and make sure there aren’t any errors on it that are bringing down your credit score.
If you do notice any errors, get them fixed before you try to refinance or renegotiate your loan. That way, you’ll be able to go in with confidence and know you’re providing accurate information.
Review Your Loan Terms and Conditions
Next, be sure to review the terms and conditions of your current loan carefully.
Make sure there’s nothing in the fine print that could hold you back from renegotiating or refinancing. For example, some loans require you to wait a certain period of time before you can refinance or renegotiate.
Talk to Your Lender One on One
Finally, it’s a good idea to talk to your lender in person or over the phone rather than communicating purely via email. This will help you speed up the process and help you get the changes to your loan that you’re looking for.
Refinance Your Loan Today
Now that you know more about refinancing a personal loan to adjust the loan term or value, it’s time to take action.
If refinancing seems like the best approach for you, we can help at Bonsai Finance. We can also help you take out a new personal loan if that seems like a better option.
We make it easy for you to apply online for a personal loan. It only takes a few minutes.
Apply today and get confirmation right away to find out if you qualify!