Refinancing means taking out another loan to pay off your existing personal loan. Refinancing only makes sense if the loan can help you to save money by offering a lower APR interest rate. Some people refinance a loan to extend the repayment period because they need more time to pay the loan. The following are a few steps that you can take when you want to refinance a personal loan.
1. Review Your Credit Report
The first step is to review your credit report for any error. The creditor will always check your credit report when deciding what level of interest rate to give you. The credit score shows whether you are a borrower that always make on time payment. Many free tools are available online for checking credit score. You can also order a free credit report from the credit bureau.
2. Compare Loans with Online Comparison Tool
You can use the online comparison tool to compare the loan rates from different lenders. The tool will ask you to enter information such as requested loan amount, and postcode. It is important to go through all the lending terms of each personal loan in the search result including interest rates, maximum loan term and loan period, availability in your states, upfront fees and other fees. If you are interested in a loan, go to the loan product page at the official lender site to check for more details. You can call the representative at the hotline number to confirm the details of the loan you saw at the loan comparison site.
3. Sign Up with a Lender that Offers Soft Inquiry
Many lenders at the online comparison site offer soft credit check that will not impact your credit score. The purpose of soft credit check is to let the borrower know the estimated interest rates. Getting a soft inquiry is important because the APR interest shown on the online comparison tool is not accurate. After submitting the initial application, you can expect to receive a loan decision within the same day or next business day.
4. Check with the Old Lender
After your new loan gets approved, make sure that the old loan gets paid off. If the loan gets paid off, the old lender will send you a notification about it. You can also check the credit report for a record that shows that it is paid off. Now, your duty is to commit yourself into paying off the new loan you applied for refinancing the old loan.
In conclusion, refinancing a loan works for people who have achieved a higher credit score than before and qualify for a loan with lower interest rate. If you choose the right loan, it may be able to help you save thousands of dollars in interest rates and you will be able to get rid of your debt faster.