Taking out a loan is sometimes the only way to get an item that you want or need. If you don’t have enough money to pay for it outright, then getting a loan is necessary unless you want to make do without the item. If the time comes when you’re unable to make the payments, or simply want to renegotiate the loan so your payments will be lower, you may be interested in the following tips on how to refinance your loans.
Refinancing a Home Loan
If you took out a home mortgage when prices were high and want to refinance the loan for lower payments, there are a few steps that may increase your chances of doing so. The first thing you need to do is make sure your credit rating is as high as it can be. Your credit score may not have been too good when you got the loan, so if it’s significantly higher now, you will get much better interest rates.
Before you go in to see a loan officer, check your credit score and make sure there are no errors. If there are, try and correct them. Keep in mind that you probably won’t be able to refinance your loan if you owe more than the home is worth. If you do, you’ll have to wait until you pay the loan down before you’ll be able to refinance.
Once you’re sure you’re eligible for a refinanced mortgage, you should shop around for the best interest rates. Be sure and give your present lender the opportunity to meet or beat the best rate you’ve been quoted. After you decide on a lender, be sure you consider all your mortgage options, such as a fixed-rate loan vs. an adjustable rate loan, before you make a final decision. Your lender will be able to answer any questions you may have, although you may want to consult with your accountant to make sure refinancing is in your best interest.
Refinancing a Car Loan
If you’re thinking about refinancing your car loan, you should first decide whether or not it will actually be worth doing. It may be to your advantage to pay down the present loan a bit in order to refinance less money. The first thing you need to decide is whether or not to make the loan for a shorter or longer period of time.
If your intention is to lower your monthly payments, then you’ll want to refinance for a longer period of time, which will make your payments less, but you’ll end up paying more in interest. On the other hand, paying more per month will reduce the amount you’ll have to ultimately pay in interest, and the loan will be paid off quicker.
As with refinancing a home loan, whether or not redoing your car loan is a good idea will depend a lot on your credit score–and you’ll also want to shop for the best rates you can get. If you choose to go with a different lender than the one that presently holds the papers on your car, the new lender will pay off your old loan and you’ll begin paying the new lender at the agreed upon rates.
Refinancing a Personal Loan
With a personal loan, the process of refinancing may be somewhat quicker. In a lot of cases, a personal loan won’t have collateral attached, so you won’t have to notify the old lender. Instead, you can merely get a new loan and then pay off the old one. From that point on, all you’ll have to worry about is making your new payments on time. Refinancing a personal loan depends to a large extent on your credit history. If you have a good credit score, you’ll have a much better chance of renegotiating your personal loan. Like refinancing a home or auto loan, redoing a personal loan in order to lower your monthly payments will result in paying more interest over a longer period of time. Sometimes, people renegotiate a personal loan in order to free up some cash in order to pay off other bills. They may also use this process to consolidate a number of other bills into one monthly payment. In most cases, this will lengthen the term of the loan, and you will ultimately pay more in interest, but it may solve a short-term cash flow problem.
Guest post from Cameron Gray. Cameron writes for AutoInsuranceQuotes.org.