Personal Loans are like superheroes to those stuck in a deep financial crisis. While we all feel grateful for Personal Loans in times of dire need, our patronage to Personal Loans turns sour when we struggle to repay the debt. High EMIs and steep interest rates can have a huge impact on your normal monthly expenditure making repayment of a Personal Loan a daunting task. However, with the government’s demonetisation move, interest rates on loans are dropping, which makes this a good time for loan refinancing.
For people struggling with high Personal Loan interest rates and EMIs, the option of Personal Loan Refinancing can be their knight in shining armour. Refinancing a Personal Loan allows you to transfer your debt from an existing Personal Loan to a new Personal Loan with a lower interest rate. It might just be a good time for Personal Loan refinancing as the interest rates are expected to drop to an all-time low. The two biggest and obvious advantages of Personal Loan refinancing are:
- You can save a lot of money by refinancing the current high interest rate Personal Loan with a new Personal Loan at lower interest rate. When you have less interest to pay, your savings increase.
- If high EMIs cause you pain and if you don’t mind paying more interest in the long run, then refinancing your existing Personal Loan might be the thing to do. It allows you to take up a new loan for a longer tenure and a lower EMI amount. Once the EMI amount is reduced, your monthly budget can breathe a sigh of relief.
While Personal Loan refinancing sounds exciting, you need to consider a few things before you opt for it. Here’s how you should go about refinancing your Personal Loan:
Before jumping onto the refinancing bandwagon, decide if it is really a wise move. Review your Credit Score to check if you can actually get a Personal Loan with a relatively lower interest rate compared to the current rate. If your Credit Score is good, then you can try to negotiate the interest rate for the new Personal Loan. But if the Credit Score doesn’t look good, then you might get a new Personal Loan with only a slightly lower interest rate compared to the rate of the existing Personal Loan and this will not make much difference to the interest amount to be paid. So, decide smartly!
Using a Personal Loan calculator, compare your current Personal Loan with the low interest rate Personal Loan that has caught your attention. Don’t forget to take into account the various charges like processing fees. You might even be charged a penalty by your current Personal Loan lender for closing the loan before its predefined tenure. Sometimes, such additional charges can make refinancing an expensive affair.
Once you are done comparing the two Personal Loans, the next step is to negotiate with your bank and try to strike a deal to either lower the interest rate or decrease the EMI on your existing Personal Loan. Most banks consider the borrower’s request in order to avoid losing a customer.
If your negotiation with the bank fails, then make an application for the refinancing of your current Personal Loan with a new Personal Loan provider at a lower interest rate. The new loan will clear off your old Personal Loan debt.
Additional Reading: Personal Loan Handbook
Now that you know what refinancing is all about, don’t be stuck with unfavourable Personal Loans that charge a high interest rate. Go ahead and explore the best Personal Loans in town!