While you usually only hear about refinancing a loan when talking about mortgages, there are a lot of reasons to consider refinancing your personal loans. In fact, it could be the most strategically-smart thing you do for your credit.
There are many reasons to consider refinancing a personal loan. 1. You get a better deal on a new loan. Interest rates might have changed or you find a website that offers lower fees.
2. Maybe you need lower payments because of income loss or you just want to free up a little monthly cash. 3. You’ve improved your credit score. Working on your credit score for even a year can significantly improve it and get you better rates on new loans.
There are a couple of ways you can approach a loan refinancing and that’s going to affect what happens. 1. You can either refinance your loan with the same lender or go with a different lender.
If you refinance with the same lender then they will probably automatically apply your new loan proceeds to pay off the existing loan and then deposit the rest into your bank account.
If you refinance with a different lender, they’ll just deposit the full amount into your account. That means it’s your responsibility to pay off the old loan.
It can be tough getting a personal loan on bad credit and refinancing can be all but impossible. That doesn’t mean you should try though.