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Is a Refinance the Best Choice for You

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by: No more debt !
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Date: Wed, 7 Oct 2015 Time: 12:30 AM
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What is Refinance? 

Simply put a refinance deal is a "new" loan which carries more favourable terms and allows you to either reduce the amount you pay each month or reduce the amount of interest you are paying. The refinance deal provides the funds to settle off any old loans and allow you to begin making payments at the new interest rate with the new repayment terms. For example, Australia based consumers could settle the balance of the three years remaining on your car loan with a refinance car loan and continue paying for three years but with a lower monthly payment. 

The Advantages of Refinance:

The main advantage of refinance is that you can secure a deal with more favourable terms and a lower interest rate. Over the full term of the loan, this could represent a saving of several hundred dollars depending on the loan balance. For example, when you secured your original car loan there may have been a number of factors such as your employment status, salary or credit history which meant that you were not offered the best deals. If your circumstances have improved, the chances are that you will now be offered a much better rate and more flexible terms. 

The Potential Disadvantages of Refinance:

The main hazard of refinancing is if your credit history has deteriorated since you last applied for a loan. In these cases, you may find that there is little benefit in regards to the interest rate. Additionally, refinancing smaller shorter term loans into a bigger longer term refinance loan will mean that you will be paying more interest over the full term of the loan, even if the rate is better. A good idea is to compare like for like deals. For example, if you have three years remaining on your loan, look at quotes for a three year refinance deal. This will enable you to have a clearer picture about whether it is the right option for you. 

Another potential disadvantage is if there are early repayment fees on your existing loans. These fees can sometimes add up to hundreds of dollars and could swallow up any benefit of refinancing. However, sometimes the new terms are so attractive that it is worth paying this fee to change over. Additionally, some lenders will even cover some of your exit fees to entice you into becoming a customer with them. To ensure that you have all the information needed, don't rely on statements for your loans, but speak to your current provider and ask them for a settlement figure. This will include any fees which would apply and allow you to have accurate information as a basis for new quotes.

About the Author

Cameron ethan If you are considering refinance, Australia based All Credit can help.


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