Paying high-interest debts can decrease the amount of money you can put into your savings, but you may be able to save more money if you refinance when conditions are favourable.
However, refinancing isn’t a one-stop solution to your debt problem. Refinancing doesn’t lower your balance or the number of debts you have.
Rather, it allows you to minimise the total cost of one or more debts by replacing them with better rates and, when applicable, lower fees.
While debt consolidation means to combine all your debt into one, refinancing focuses on replacing some debts to secure more favourable terms.
Refinancing doesn’t necessarily mean switching credit providers – the main idea is to optimise your debts by switching to a more favourable loan from the same or different provider.
What do I need to refinance?
If you’re considering refinancing your loan, make sure to make ample preparations so that you can secure the most appropriate deal.
The most important thing you need is to have a good understanding of your current loan terms so that you have a good starting point for when you negotiate new loan terms.
Shop around for different loans and compare how much you can save if you take up the offer. Likewise, you may speak to a licensed broker who can present a variety of options outside of your credit provider.
How can I refinance?
Refinancing itself is easy because you just need to look for a better loan than your current one and make the switch. However, there are several things you need to consider before finalising the switch.
- Compare different loans you may potentially switch to
Before you inform your lender that you’re refinancing, make sure that you’ve done your homework.Research different loans you may switch to and take note of how much the fees are then create a shortlist of specific loans
- Talk to your lender
Call your lender to inform them that you plan to refinance your loan. If you’ve been a good client who makes timely repayments, there’s a big chance that they may want to retain you. If this is the case, consider asking for a better deal on your loan. - Make the switch
If your lender refuses to give you a better offer and the loan you’re considering really has better terms, push through with refinancing.
What are the benefits of refinance?
There are several benefits you may gain if you choose the right loan to refinance to.
You can save more money
Refinancing your loan may help you save more money because you would be switching to another loan with a more favourable interest rate.
On top of this, your total savings may further increase if your lender charges lower fees.
Pay off your mortgage faster
Refinancing doesn’t only save you money, you may also be able to pay off your balance faster if you maintain the repayment amount despite better terms and a lower interest rate.
Likewise, you may consider refinancing into a loan with a shorter term.
You can free up your finances
Refinancing your loan may help you regain your financial footing by freeing up some of your money that’s tied up for repayments.
You can consolidate your debts
If you have a good credit score, refinancing may allow you to consolidate your debts and decrease your financial liabilities.
Get in touch with us at 08 8211 7180 or info@centramoney.com.au to find out how we can help you reach your financial goals.
Article courtesy of Nestegg.