Refinancing a personal loan is a great way to get a lower rate or more manageable terms. But can you refinance a personal installment loan?
The short answer? Yes, you can refinance your personal loan. The long answer? Let's get into it.
Refinance your personal loan for a lower interest rate
If you've been paying down your loan with on-time payments, you may very likely have built up your credit score. That new and improved credit score could lead to a lower interest rate (and lower monthly payments).
Coupling your personal loan with a lower interest rate means you’ll save more money in the long run.
Refinance your personal loan for a strong credit score
Speaking of credit scores, did you know that "length of credit history" is one of the five factors of your credit score. "Length of credit history" refers to how long you have held certain accounts.
If you want to maintain your hard-earned credit score, a refinance of your personal loan can lower your rate, lengthen your terms, and help you hang on to that account.
Refinance your personal loan to pay it off faster
You could be closer to completely paying off your loan. With a refinance on your personal loan, you can adjust your payment terms to pay your loan off faster. This will typically mean larger monthly payments, but can help you reach that payoff date sooner than before.
Refinance your personal loan for lower monthly payments
There are plenty of reasons to go after a lower monthly loan payment. Losing a job, inflation on the rise, an unexpected turn in your finances – things happen, and it can ease a lot of monthly stress to have a little less money come out of your bank account each week.
Something to consider
Be mindful that a refinance is actually a whole new loan. Your old loan gets closed out and replaced with the refinanced one, complete with whatever new rate or terms you work out. Because it's a new loan, you'll likely have a credit check during the process, giving you a little hit to your credit score. As you make payments on your newly refinanced loans, your credit score should pick back up again. Still, it's good to remember.
Now the question is – is a refinance right for you?
Borrowers who have good or excellent credit (690 or higher) and who have a lower debt-to-income ratio receive those low personal loan rates. If you’ve made on-time loan payments, your credit may be slowly creeping upwards.
If you need lower payments, refinancing doubles as lowering monthly payments AND extends your repayment term. Use that extra money to your advantage!
And finally, if higher monthly payments don’t make you bat an eye, refinance for a short-term loan, lower your interest costs, and pay off the debt even quicker.
If you’re considering a refinance, World Finance is here to help.