When it comes to topics like refinancing, I think a lot of consumers have some sort of vague idea of what it is and how it works, but not much about the details. Honestly, it makes sense – it’s not like we’re taught about this stuff in school or anything. Still, though, it can be valuable information to have.
If you didn’t know this, when you’ve got a credit agreement (so, a loan, a credit card, etc.), you might be eligible to refinance it. All that means is that you can either change your initial contract with your lender, or open new loans to essentially “buyout” your previous debts. Why would you want to do that, though?
Well, that’s what I’ll be covering today, as well as some of the reasons that it can be beneficial for us as borrowers. Hopefully, it won’t be too frustrating to follow along! Either way, be sure to stick around to get some of the inside info on refinancing.
How it Works
Most of us who are familiar with refinancing know about it thanks to mortgages. You see, often it’s advertised as being solely for that purpose, which isn’t actually true. In fact, you can go through this process for pretty much any type of loan that you’ve got, although it won’t always be approved.
The first step is pretty much the same as when you got the original loan – you’ll have to apply. Thankfully, since it’s not too different, you’ll already have an idea of what to expect. Of course, the specifics will vary depending on the lender that you’re working with. For example, online lenders could be international and offer different rates or terms than the ones from your own country.
If you want an example of what that looks like, there are plenty out there online. This is one of them, https://besterefinansiering.no/, which goes through some of the process in Norway. Naturally, it is a bit different there, so it can give you an idea of what to expect if you want to borrow from a lender there.
Application Tips and Tricks
As far as your applications go for refinancing, there are some “life hacks” of sorts that I’d like to share. First off, you can apply for multiple of them at once, from a variety of different lenders. If you do this, you’ll be able to compare the rates that you’ve been given from each creditor. Basically, it’s giving you some choices that you may not have had access to before.
Now, maybe you’re wondering how that works. There’s a common misconception that credit agreements have some sort of limited time availability or lock-in period. Luckily, that’s really not the case. Borrowers have freedom to take time and ponder their offers and selections.
So, don’t be afraid to shop around for lenders. Even if one is trying to pressure you into quickly accepting, know that you are not required to do so. Some other tips would be to gather all of your paperwork up beforehand. That could be the contract for your previous credit agreement, any personal identification documents, and your tax information, just to name a few.
Read the Fine Print
By now, I think most of us are conditioned to just skip past the annoying “terms and conditions” part of applications and contracts. However, for loans, I would definitely recommend that you don’t do that. Instead, you should read over everything carefully so that you know what you’re getting yourself into.
Don’t worry if you can’t understand some of the words. For one thing, you can always ask your lender questions about it. Additionally, though, you can get the assistance of a family member or even a financial advisor if you have one! Two pairs of eyes are better than one.
What should you be watching for, though? In my opinion at least, you should double check on the length of the new credit agreement. You see, even if you were almost finished paying off your previous one, there’s a chance that the overall timeline will be reset with refinancing. Typically, you will at least be getting some time added on.
Next would probably interest rate, which is another pretty big deal in the world of loans. The lower you’re able to get, the better. When folks talk about the “best” refinancing options, more often than not they’re referring to having low interest rates compared to competitors. Lastly, take a look at the new proposed monthly payments. It’ll be up to you to decide whether or not they’re something you can handle financially speaking.
Finding the Best of the Best
Now that you’ve got an idea of what you’re looking for when it comes to the “best” refinancing opportunities, you’re probably still wondering how you can find them. As you can probably expect, it’s a bit easier said than done. However, thankfully it’s not too hard to find the good ones.
Search engines have really done us wonders, there. Keep in mind that the first few listings after a search are usually sponsored posts, but at least Google makes it clear that it’s been paid for. I usually just scroll down a little more to see the more organically generated options.
Anyhow, once you find some viable options, you can start to research each of them. Remember, it’s usually a good idea to expand your horizons a bit here and to look at some international options amongst your top choices! Once you’ve got some company names and you’ve scoped out their websites, you may want to check out some reviews, too.
Typically, I take a look at articles from financial experts as well as the testimonies of other borrowers, but you certainly don’t have to do it in the exact same way. Once you’re confident in your selections, you can go ahead and submit your applications! From there, just start your comparisons and finalize the contract with the lender that you want to work with.
Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area.