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If you have a loan, you might be wondering whether it’s still an appropriate fit for you.
Sometimes, people who have borrowed money opt to refinance their loans after a period of time.
There are a few things to think about, though.
What is personal loan refinancing?
Refinancing refers to moving your loan to a new lender or renegotiating your terms with your existing lender.
If you’ve encountered hardship or your circumstances have changed significantly since you took out your loan, you may be able to negotiate different terms with the lender you’re already with.
But if that hasn’t worked sufficiently, or you’re not happy with the settings of your current loan, you might look at your options with another lender.
If you shift to a new lender, you’ll take out a new loan and use that money to repay your existing one.
People sometimes refinance to access lower interest rates, consolidate multiple debts into one payment or adjust their loan terms.
Benefits of refinancing a personal loan in New Zealand
If you refinance to another lender, you may be able to access lower interest rates, particularly if you now have a better credit score or other factors have changed, which means a lender you weren’t able to deal with in the past might now be willing to give you a loan.
If your current lender isn’t willing to extend your loan term but a new one will, you may be able to do this to lower your monthly repayments.
People also sometimes choose to refinance for debt consolidation reasons. Combining a number of loans into one new one can make them easier to manage.
When might you consider refinancing?
There are a few times you might think about refinancing your loan.
Your situation has changed
If you had bad credit when you applied for your loan, or you were applying on the basis of a lower income or limited evidence of self-employment, you may now have more options.
Interest rates have dropped
If there are lower interest rates available from other lenders, you may be able to break your term to take these lower rates, but take care that you understand the fees that may be associated with this.
If you’re struggling to make your repayments because your circumstances have changed or you are otherwise in financial hardship, a good first step is to approach your current lender and ask what the options are. If you’re behind in your payments, it’s possible that refinancing will not be an option, but your current lender may have options to help you.
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Steps to refinancing a personal loan
Here are a few steps you can work through if you’re wondering whether refinancing is right for you.
Look at your current loan settings
What interest rate are you paying? What balance is left? What fees might you encounter if you were to refinance?
Talk to us about your options
We can help you understand what might be available for you if you were to make a change.
Apply online
If you decide refinancing is right for you, you can complete a form online in minutes. Then, you’ll speak to a better finance™ adviser who can offer personalised guidance for your situation. When the loan is approved, you’ll sign the agreement online and can receive the funds within 24 hours.
Key things to think about before refinancing
Fees and costs
Will you face any break fees? There may also be establishment fees for your new loan. Check that you understand how much this might add to your total balance.
Loan term adjustments
If you’re extending the term of your loan, you could find that you end up paying more interest overall, even if your regular repayments are smaller.
Eligibility criteria
We can help you work out which lenders might be a fit for you.
Refinancing versus debt consolidation: What’s the difference?
Refinancing refers to moving one loan to a new lender, while debt consolidation is the process of combining multiple loans.
Debt consolidation can be a great option if you want to simplify your lending, while refinancing may suit if you aren’t happy with your current loan terms.
Tools to help you make the right decision for you
There are lots of tools available that can help you work out what might be right for you.
You can use loan repayment calculators or debt consolidation calculators online, and the better finance™ team is here to help seven days.
If you have questions about your lending, drop the team at better finance™ a line. We are experts in personal loans and here to help, every day of the week.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.