Are you carrying several loans on your shoulders? Do you sometimes lose track of whether you have paid everything this month? Do you want to reduce your debts? Combine all your loans into one and get new, better terms for yourself. That way, you will have a clear overview of exactly how much you owe, and you can save up to a couple of hundred dollars. In this article, I will introduce you to loan refinancing and loan consolidation.
The market is constantly changing. So it is possible that the terms and interest rate at which you took out your loan are now different. The conditions right now might be more favourable for new loans. For you, this means you have the option of paying off your old loan with a new one, so-called loan refinancing. This reduces your debt.
What is loan refinancing?
Refinancing a loan means paying off an existing loan with a different one. You arrange the new loan with a competing bank and set more favourable terms with a lower interest rate. Your repayments stay the same size, but the repayment period will be shorter. Or you keep the loan term the same and set lower monthly payments. Depending on the length of the loan and the terms set, you can refinance more than once. It depends on how much the market situation changes and what your contract terms are.
What is loan (debt) consolidation?
Loan consolidation means merging your loans into one. Nowadays, every bank and non-bank lender on the market offers this service. A very pleasant benefit of having 1 loan is having an overview. You know exactly how much you still owe and how much you have to pay that month. When you consolidate your loans, refinance them at the same time. Ask for better terms and a more favourable interest rate.
I have 1 loan
Imagine that you pay the same repayment amount every month, but your loan gets paid off several months sooner. Doesn’t that sound appealing? So do not hesitate, find out what interest rates banks are offering today and compare them with the interest rate on your loan. For the hundreds of dollars you could save, it is worth spending your time on this. Nowadays, every bank and non-bank lender offers loan refinancing.
Tip: As soon as you have an offer with better terms and a lower interest rate, try contacting your own bank. Call them and tell them straight out what offer you have from a competitor. They might offer you a better deal themselves.
I have several loans
If you have several loans, combine them into one. Your debt situation will be far clearer, and you will see at a glance when you will pay off your debt. What’s more, if you have several loans, there is sure to be one that was not taken out on completely favourable terms. Consolidating your loans and refinancing them will therefore mean savings of hundreds to over a thousand dollars for you.
With lower monthly repayments, you will also manage to save a dollar or two. Do you know how to learn to save? Financial literacy is also important, and unfortunately it is not taught in schools.
How to refinance and consolidate loans
Take a look, for example, at a comparison of interest rates. There you will find information from several banks and get an idea of how interest rates compare. There are far more financial institutions on the market, so pick a few and look at their websites. Visit several banks in person and have them put together offers for you. Compare these and choose the most favourable one.
Do you have non-bank loans and would rather have a bank loan?
You can try refinancing with a bank. Expect them to ask you to provide some documents:
- Identity documents
- An extract from the credit register
- Confirmation from your creditors of the current amount of your loans
- Proof of your payment history
Other conditions for getting a bank loan:
- Sufficient income to make repayments
- Not being in a probationary or notice period at work
- Having no negative records in the credit registers
Definitely do not take the first offer straight away, have several drawn up instead. Refinancing and consolidation will take up a lot of your time, but it is definitely worth it. The more effort you put into moving your liabilities, the more you may be able to save. This way, you will get rid of your debts faster, and that is worth it. For the future, also set up a chart of income and expenses, so you avoid further debts.
Are you actively dealing with your debts? Share your experience with us in the comments, and do not forget to share this article.
Thanks.
