Refinancing a personal loan may be a great financial solution that could bring many benefits. Refinancing is simply taking out a new loan to repay the last one, and is usually done to consolidate liabilities which may reduce the number of repayments being made or to be able to borrow more.
Why might refinancing be a good idea?
- You can take advantage of better loan features. This may mean a better interest rate, reduced repayments, more time to repay the loan, or extra capital to get those things you want, now.
- You can consolidate your existing debts to save money. This may mean you become debt free quicker, and reduce the overall amount you will repay.
If you’re currently considering refinancing a personal loan or other debts, we’ve broken down the process into 5 steps. Follow these steps and you may increase your chances of being successful when applying for a new personal loan, and also ensure that you make the right decision based on your own financial circumstances.
1. Check Your Credit File and Work to Improve Your Credit Rating
One of the most common reasons people look to refinance personal loans and debt in general is that their credit score has improved, meaning they can refinance with a better interest rate than previously, thus reducing their repayments.
Check your credit file – you are entitled to check it free – and ensure the information held is accurate. You should also work to improve your credit rating. With the introduction of Comprehensive Credit Reporting (CCR) in Australia, it is now easier for consumers to highlight that they are a reliable borrower. The Big Four banks are legislated to share positive reporting information, while many other banks and non-bank lenders including NOW FINANCE have voluntarily opted in.
This means prospective lenders can see evidence of you making repayments to your accounts on time, as opposed to in the past when lenders could only see negative aspects of your credit file such as missed payments or other credit infringements.
If you manage your use of finance, limit your exposure to debt and the use of your credit cards, and ensure you make all payments on time, you may increase the chances of improving your credit score and may enable you to access a better deal when it comes to refinancing.
2. Compare Personal Loan Deals
Don’t compare personal loan deals by “shopping around” and applying for many different loans to see what you are offered. This is a sure-fire way to negatively impact your credit file and score, and will likely lead to you being offered only very uncompetitive personal loan deals or even being declined outright.
Instead, spend some time looking around personal loan providers and see what’s on offer. If you have a “wish list” of specific features you want to see in your personal loan, such as a lower interest rate, lower on-going or exit fees, then keep this in mind as it will help you to eliminate any lenders that don’t meet your preferred criteria.
If you have a great credit score and a very positive credit history, it may be the case that you will get a better personal loan deal by borrowing from a non-bank lender.
3. Consider Any Refinancing Costs
As we noted earlier and looked at extensively in our previous article on refinancing, one of the main reasons people choose to refinance is because they want to save money.
While refinancing could look like it is saving you money in the short-term, for example by reducing your regular debt repayment, it could still end up costing you more.
As well as your repayments, consider whether there are any additional fees and charges such as:
- Application or establishment fees
- Ongoing service or account fees
- Exit or early termination fees, should you wish to pay out your loan prior to the end date*.
Ensure you check these with each lender, as what could initially seem like a great deal to help you refinance can easily end up costing you far more than you think.
4. Make a Decision on Whether to Refinance
Having checked your credit file and potentially taken some time to rectify any errors or improve your credit score, compared personal loan deals, and considered the full costs of refinancing, you’re now in a position to make a decision on whether you wish to proceed.
While it is recommended that you don’t apply for any personal loans yet – remember what we said about the impact this can have on your credit score – you should have a great idea of which lenders are likely to be able to provide you with the best deal.
If you are interested in NOW FINANCE personal loans, you can get your personalised interest rate before you apply to get visibility on what your repayments will be, with no impact on your credit score and no obligation to proceed to a full application.
5. When You’ve Refinanced, Confirm Your Previous Loan is Settled and the Account is Closed
Once you have used your new personal loan to repay your old loan or to clear previous debts, make sure that all of the balances are zero and that your old lenders have closed your accounts. This will ensure you avoid any additional fees and don’t receive any further statements regarding your account.
Your Personal Loan Should Fit You
At NOW FINANCE, we understand that everyone is different, therefore different loan solutions may be suitable for you depending on your circumstances.
Our personal loan specialists are committed to ensuring they find the best possible solution for you. If you are looking to refinance an existing NOW FINANCE personal loan, a loan from another lender, or other debts, we can help you.
You can do any of the following to get started with applying for a personal loan with NOW FINANCE:
- You can get your rate here with no impact on your credit score, and then proceed with your application if you’re happy with the rate you’ve been offered.
- Contact us on 1300 275 669 to speak with one of our Australia-based personal loan advisors to discuss your needs and get started with your loan application.
- Chat to us via our live chat functionality and request a call back from one of our advisors, or fill out the form on our Contact Us page.
Refinancing your personal loan and enjoying the benefits of doing so could be just around the corner. Follow the steps in this guide to help yourself to understand if refinancing is for you, and get in touch with us as soon as you’re ready to proceed with your NOW FINANCE personal loan application.
* NOW FINANCE have not charged exit or early termination fees since June 3rd, 2018.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.