Refinance Your Personal Loan: How & When to Do It
Whether your circumstances have changed or you’re simply reviewing your finances, it can be worth checking how your current personal loan compares to others in the market today, and if you should refinance your personal loan. We’ll give you an overview of what to consider when choosing to refinance a loan so you can decide if it is worth it for you and how to do it.
- What does it mean to refinance a personal loan?
- Advantages and disadvantages
- When to refinance
- How to refinance
- Is refinancing worth it?
- Refinance a personal loan with bad credit
What does it mean to refinance a personal loan?
Generally, refinancing a personal loan consists of taking out a new loan to pay off an existing loan debt. However, you may also need to refinance a personal loan to get more money.
You may choose to stay with your existing loan provider or seek another option. Whoever you choose, it’s important to consider what happens when you refinance a personal loan. And most importantly, ensure that the new loan is right for you and your individual circumstances.
When to refinance a personal loan
Ideally, the best time to refinance a personal loan is when you are able to save money in the long-term or if you’re needing to secure more funds.
Common reasons to refinance include:
- Improved credit score – your credit score may have improved since applying for your current loan, meaning you may now qualify for a loan with a lower interest rate, better terms and more money.
- Consolidating debt – you may be in a position where you need to streamline your debts.
- Better deal – you may have found a personal loan that offers a better deal and better terms than your current loan.
How to refinance a personal loan
You can refinance a personal loan for more money through your current lender or another company. The process of refinancing a personal loan begins with applying for a new loan. But there are important steps you can take before applying for a new loan.
Check your credit score
Too many declined loan applications may affect your credit score so it’s a good idea to check this yourself before researching or applying for any loans. Checking your credit score yourself does not lower or impact your credit rating, and is a good way to keep on top of your own financial health. You can do this through a number of providers such as:
Decide mow much money you need
Whether you are consolidating debts, paying off an existing loan, or seeking more funds, you will first need to decide how much money you would like to borrow. You will need to consider any prepayment fees for your current loan, and any upfront fees or charges for the new loan when calculating your final borrowing sum.
Research your options
Before you apply for any loan, it’s important to research and compare a wide variety of loans to determine which is the best option for you. When comparing loan options, be sure to check their fees, additional features, interest rates and terms.
Check with your current lender
Even if your research has rendered better loans or more suitable lenders, it can be a good idea to consult with your current lender to see if they are willing to offer a better deal to keep you as their client.
Apply for the loan
Once you have conducted all your research and have decided on the best loan option for you, it’s time to apply for the loan. Ensure you have all your documentation ready such as payslips, bank statements, and identification. There may also be an opportunity in the application process to advise that your intention is to refinance an existing loan.
Keep up to date with your repayments
Once you receive your new personal loan, it’s important to make your repayments on time. By making regular, timely payments you can be sure to pay your loan off on schedule and save money on interest and late payment fees.
What are the advantages of refinancing a personal loan?
Like any important financial decision, there are pros and there are cons. So what are the advantages of refinancing your personal loan?
Lower interest rates
It’s common knowledge that interest rates fluctuate. You may find that by refinancing your personal loan, you are able to achieve a lower interest rate. Having a lower interest rate will save you money in the long run and may even help you pay off your debt faster.
Shorter loan terms
If your financial situation has improved, particularly if you have managed to secure a lower interest rate, you may find you’re able to make higher monthly repayments and a shorter term. A shorter loan term means you reduce the amount of overall interest you would have paid on a longer term, saving yourself money.
Consolidate your debts
If you find that you have multiple debts across multiple providers, it can be difficult to keep track of your repayments. It also means you may be paying significant amounts of interest. Refinancing your personal loan can allow you to consolidate your debts into one easy and simple repayment, while helping you reduce the amount of interest you pay.
What are the disadvantages of refinancing a personal loan?
While refinancing may seem like the perfect solution, it’s important to consider the disadvantages so you are fully prepared when you make your decision.
With any new loan there are often upfront fees and charges that can hit your wallet hard. So it’s important to consider whether refinancing is really worth any extra costs that may come your way.
Be careful when considering using one loan to pay off another as you may be charged prepayment penalties. A prepayment penalty is a fee that some lenders charge when a loan is paid off early and these fees can be quite high depending on the loan amount. It’s important to work out whether the prepayment penalty will negate the benefits of refinancing your personal loan.
Impacted credit score
As refinancing still involves applying for a ‘new loan’ it can temporarily lower your credit score. Although this dip in your credit score is temporary, it can be a factor to consider when timing your loan application.
Is refinancing worth it?
Depending on your individual circumstances, refinancing your personal loan could end up saving you a lot of money in the long run. However, it’s important to consider all of the above factors before making that decision. Whatever your decision, the main goal should always be to place yourself in a better financial position than you were before.
Refinance a personal loan with bad credit
You can refinance with a bad credit rating in Australia. Swoosh offers guaranteed approval on bad credit loans, as long as you meet eligibility requirements.
It can be more difficult to get a large personal loan with bad credit. If you struggle to find a lender, you may benefit from seeking professional financial advice.
Swoosh has you covered
Swoosh believes in giving everyone a fair go. When you apply to refinance a small personal loan with Swoosh Finance, it won’t matter if you have bad credit. We base our secured loans on your current situation, not your past credit reports, and offer finance for bad credit up to $5,000. Apply online with Swoosh today!
How soon can you refinance a personal loan?
How soon you can refinance your personal loan will depend on each lender’s terms and conditions. Some lenders allow you to refinance as soon as you begin making repayments, others may require a minimum repayment period.
It’s important to keep an eye out for prepayment fees/penalties. Depending on your loan amount, prepayment fees can be significant and may negate the benefits of refinancing. It’s best to discuss your options with a financial expert or your loan provider before making any decisions
Swoosh customers can apply to refinance their loan after 6 months of repayments, as long eligibility requirements are met. There are no penalties for paying off your loan early and you can contact our friendly team anytime you need help.
How often can you refinance a personal loan?
It will depend on what lender you are with and how well you have been managing your loan repayments. Although every lender will have their own terms and conditions,you can generally apply to refinance a personal loan as many times as you need. It’s important to remember that loan applications can temporarily lower your credit score. So think carefully and do your research before applying for any loan.
Does refinancing a personal loan hurt your credit?
Refinancing can have a positive or negative impact on your credit score depending on how you manage your debt.For example, if you are consolidating multiple debts into one loan, you may find it easier to make payments on time, which would help improve your credit score
To avoid hurting your credit score when applying for loans, ensure you always:
- Check your current credit score: checking your own credit score is important as this will help you decide what loans you are eligible for. Checking your credit score yourself is free and does not impact your score.
- Read the terms and conditions: before applying for any loan, always read the terms and conditions to ensure you are eligible for the loan.
- Check for fees: always check for any fees that you may be charged throughout the loan process. This can include prepayment fees, application fees, and admin fees. Loan fees can impact how much you need to borrow and how much you are eligible to borrow.
- Check the interest rate: your interest rate may change when you apply to refinance a loan. Make sure you understand what you will be paying before you sign a loan agreement.
Can I refinance my personal loan?
Each lender will have different eligibility requirements around when you can refinance. If you are a Swoosh customer, you can apply to refinance your loan6 months after you begin your loan, as long as you meet eligibility requirements. If you would like to check if you can refinance your loan, just ask our friendly team.
Ready to refinance your personal loan? Apply online with Swoosh today!