Many of us have loans that we think we need to stick with until we’ve paid them off fully when in reality it doesn’t have to be that way. You might want to think of refinancing your loans and it will actually mean that you could end up better off. Refinancing isn’t for everybody, but it can be a smart decision for many. Here are some situations where refinancing your loans might be the best way forward.
In case of an emergency.
We don’t like to think of the worst happening to us, but sometimes a disaster does come knocking. Whether it’s a leaky roof coming in to destroy your children’s brand new Disney wall décor or surprise medical bills that need to be paid, you might need to refinance your mortgage to tap into your home equity so you can pay off any of these surprise large bills. This should really be a last resort for emergencies, as refinancing comes with its own costs, so be sure to consult an advisor with better experience before you make any big decisions.
Secure a lower rate.
If you’ve already got a loan that was taken at a time with higher interest rates, you might be able to get better rates now if you refinance. Take a look at comparison sites to see what the going rate on a home loan or any other kind of loan and see whether you can get a lower interest rate for your homeowners’ loan. There are a number of factors that can influence this, and so interest rates change all the time. Stay clued into the market to make sure you’re always aware of potential better deals.
Shorten the loan length.
Having a loan hanging over your head is never fun. If you’ve got more capital now or a better credit rating, you might be able to take out a shorter loan and pay off your debts sooner if you look into refinancing options. Even if your parents took out a loan for your college they can refinance it. Usually, those loans have steeper rates than normal student loans so it’s really important to refinance parent plus loans as fast as possible. Your mortgage payments or student loan repayments could be a thing of the past sooner than you think!
Consolidate your debt.
If you have a collection of different loans, you might have money coming out of various bank accounts at various rates. To make things less complicated and get the same rate for all your loans, refinancing can help you consolidate your loans into one direct loan, depending on your credit score. Not only is this easier to manage, but it can also help you to see exactly how much interest you’re paying as a borrower.
Free a cosigner.
Do you have someone else on your loan that’s tied into the repayments, like your parents or spouse? Refinancing your loan can make you the sole borrower, depending on your credit score and eligibility. That frees you both up to be more independent and fully in control of what’s going on with your finances. The cosigner will also be free to take out loans in their own name more easily. Be careful, however, as now the loan will depend on your credit score alone, which may affect the terms.
Change your lender.
You might have had a bad experience with your lender or simply want a change from the original lender. Bad customer service, poor terms, or any number of things can all mean that you’re looking for a change. Refinancing your loan with someone else gives you a fresh start, but make sure to do your research carefully, so you don’t find yourself needing to change again in a few years’ time. There’s no point exchanging one bad lender for another one!