You can refinance a personal loan to help save money. This is a very common practice that can help you lower the interest rates on your loans and extend the terms.
This post will discuss loan refinancing and how taking a second personal loan to pay a previous loan can translate into making more affordable payments.
If you need a loan with affordable rates and friendly terms, apply with Camino Financial:
What is Loan Refinancing?
Simply put, personal loan refinancing refers to the process of taking a new loan to pay off the loan that is outstanding to another lender.
So, if you decide to refinance a personal loan, it could save you money as the new lender could charge a lower interest rate. As we mentioned earlier, you could also choose to refinance a personal loan so that you get a longer period to pay off your debt.
Loan Refinancing: an Example
Say you’ve borrowed a sum of $8,000. After several months you realize that you can’t afford the payments because the interest rates are too high. You still have 7 payments left and owe $5,000 approximately.
What should you do?
You can opt for personal loan refinancing and find a lender that offers great interest rates and longer terms. Then, you borrow the $5,000 you owe and use them to pay the first lender.
And because the second lender has friendlier terms (you have one year to repay the amount), you won’t have any problem making the monthly payments.
You can find personal loans with repayment terms that extend well over one year. At Camino Financial, our Solopreneur Loans can be repaid over a three-year period.
Can you Refinance a Personal Loan? What to Consider
If you’ve taken a high-interest personal loan that you can no longer afford, the following question is probably uppermost in your mind:
Can you refinance a personal loan?
The answer is “yes,” but the next crucial issue you need to address is whether you should go in for personal loan refinancing. Before you make a decision, ask yourself these questions:
- Are your current payments unaffordable? If you can’t make the monthly payments anymore, you should refinance your personal loan.
- Is the new loan available at a lower interest rate? Lower interest rates will allow you to save money.
- Does the new loan have more time to repay? This will allow you to make smaller and more comfortable payments.
- Are the monthly payments of the new loan more affordable? If so, then it’s a good idea to refinance your personal loan.
- Will the application process lower your credit score? Camino Financial’s application process doesn’t hurt your credit score.
- How much money will you save with refinancing? If you’re not saving any money but just changing lenders, it might not be worth it.
A Step-by-Step Guide to the Personal Loan Refinancing Process
Here are some tips on how to refinance a personal loan:
1. Check your Credit Score
If you’ve made timely payments on your previous loan, your credit score is probably higher than it was when you got the first loan. Because of this, most likely, you’ll be able to get better terms.
You must know what your score is to make sure you meet the minimum credit score requirement stipulated by the new lender. Most banks and financial institutions would look for a score of 600 or more.
At Camino Financial we can approve your loan even if you have no previous credit history and, depending on the situation, we could even help you if you have a bad credit score.
2. Shop Around
When you’re refinancing your personal loan, make sure you consider different lenders before you settle on one and apply.
Compare the rate and terms and conditions of at least three lenders.
Find here the top personal lenders so you can settle on the one that fits your needs.
Complete the application process carefully.
Take your time to collect the documents you need to submit and double-check what you’ve written on the application form. An error could delay the approval process and may even result in your application being rejected.
The application process at Camino Financial will only take you 10 minutes to complete, and it’s completely paperless.
4. Pay the Original Loan
After you receive the money from the new lender, pay off your outstanding personal loan as soon as possible. However, take into consideration that you may have to pay prepayment penalties and closing fees.
How to Find Personal Loan Refinance Options
What exactly should you look for when you’re trying to identify a lender to refinance a personal loan?
Here’s a checklist you can use:
- Look for the lowest APR
- Do they charge additional fees that’d make the new loan expensive?
- Do you meet the credit score requirements?
- How soon will the money be available?
- Is the rate fixed or variable? Remember that variable rates can increase the monthly installment
- Is the personal loan application process online, or do you need to go to a branch office? Online loans are paperless, and the process is quicker
Is it Always a Good Idea to Refinance a Personal Loan? Pros and Cons
Maybe you’re thinking of looking for personal loan refinance options to refinance a high-interest personal loan. Many borrowers manage to get a better rate and terms when they refinance their loans.
But loan refinancing has both pros and cons that you should consider before refinancing.
Here are the points you need to consider when you are deciding whether you should refinance a personal loan:
Pros of Personal Loan Refinancing
- You could get a lower annual percentage rate (APR) on a new loan when you refinance a personal loan.
- You could also get more time to repay. A longer loan term, say, one that increases the repayment period from one year to three years, could reduce your monthly installment significantly.
Cons of Personal Loan Refinancing
- A longer repayment period has its downsides. Although you’ll be paying a lower monthly installment, your total interest cost will likely go up. So, in dollar terms, you’ll end up paying more.
- Some lenders charge origination fees when you refinance a personal loan. This could range from 1% to 10% of the loan amount.
- When you repay the original lender, prepayment penalties and closing fees may be applicable, adding to your overall cost.
When you approach a new lender to refinance a personal loan, they may see your credit report and check your credit score. Many lenders also have a minimum monthly income requirement that you need to meet.
Refinancing a Personal Loan is Easy with Camino
Camino Financial could be your best option if you’re looking for a lender to refinance a personal loan.
Our company’s motto is “No One Left Behind,” and our easy-to-meet and straightforward eligibility criteria reflect this philosophy.
Here’s a quick overview of our Solopreneur Loan:
|Loan size range||$1,500 to $7,500|
|Loan terms||12 to 36 months|
|Type of rate||Fixed|
|APR||33% to 35%|
And did we mention that our Solopreneur Loan is easy to qualify for?
To be eligible to apply, you just need:
- an ITIN or SSN
- a monthly income of $1,500
- an active bank account (for at least 6 months)
- to be current with any other outstanding debts
We invite you to apply for a loan today. It takes only a few minutes and won’t hurt your credit score.