Refinance a Personal Loan
When you refinance a personal loan, you replace your current loan with a new one that has potentially better rates or different terms. This strategy can help you save money and improve your financial situation. Let’s take a closer look at how refinancing a personal loan works, why you might want to refinance one, and how to refinance your personal loan.
How refinancing a personal loan works
If you decide to refinance a personal loan, you’ll apply for a new loan, either with the same lender or a different one. Then, you’ll use the funds you receive to repay your current loan. Once you’ve paid off the old loan, you’ll begin to make payments on your new loan, which will likely have a new interest rate and terms. Refinancing a personal loan can offer a variety of benefits, which we’ll discuss below.
What personal loans can I refinance?
There are a number of personal loans you can refinance, including:
Payday loans
Payday loans are short-term, small dollar loans you can pay back when you receive your next paycheck, usually in two to four weeks. These personal loans can provide fast cash to cover expenses until you get paid.
Installment loans
With an installment loan, you’ll get a sum of money at once and repay it over time via fixed monthly payments, or installments. Your repayment schedule for this personal loan may be anywhere from a few months to several years, depending on the loan terms.
Title loans
Car title loans are secured personal loans that use your car as collateral. Upon approval, you’ll give the lender your title in exchange for a lump sum of cash, based on how much your car is worth. With these personal loans, you can continue driving your vehicle as you pay back what you owe.
Mortgages
Mortgages are loans designed to help you cover the high cost of a house, condo, or other property. In many cases, you’ll repay your mortgage in 15, 20, or 30 years. If you don’t have the cash to pay for your home upfront, a mortgage is invaluable.
How to refinance a personal loan
If you’d like to refinance a personal loan, follow these steps:
1. Research lenders: While it may be tempting to refinance with your current lender, you might be able to find a better offer elsewhere. Shop around to learn which banks, credit unions, and online lenders offer refinancing. Then, compare the rates, terms, and fees of each refinancing option.
2. Choose a refinance offer and gather documents: Once you choose the right refinance offer for your goals, collect the documents you’ll need to apply. Many lenders will ask for a government-issued ID like a driver’s license and passports, along with pay stubs and tax forms.
3. Fill out and submit an application: Fill out the refinancing application online or in person. You’ll need to share personal details like your name, email, and phone number. You may also have to provide information on your current loan.
4. Wait for approval: You’ll need to wait until the lender reviews your application and gets back to you with a decision. Fortunately, many lenders may let you know if you’ve been approved the same day you apply or within 24 hours.
5. Begin making payments on your new loan: After you’re approved and receive the funds, use them to pay off your current loan. Then, begin to make monthly payments on your new loan, with your new interest rate and terms.
Benefits of refinancing a personal loan
The most noteworthy benefits of a personal loan refinance include:
You could get a lower interest rate
You might be able to lock in a lower interest rate than what you’re paying on your current loan. This is likely if your credit has improved since you first took out a loan or interest rates have dropped. A lower rate can save you hundreds or even thousands of dollars over the life of your loan.
You could get a shorter repayment period
If you’d like to pay your personal loan off sooner and save some money on interest, you can do so by refinancing to a shorter repayment period. If you have a 30-year mortgage, for example, you might want to refinance to a 15-year mortgage so you don’t have to wait as long to own your home free and clear.
Make monthly payments more manageable
If you’re struggling to make your monthly payments, refinancing can lower them through a better interest rate or longer term. Just keep in mind that stretching out your loan can cost you more in interest in the long run.
You could get a larger loan amount
Refinancing can also give you the chance to borrow more money than you did originally. If your circumstances have changed and you now realize that your current loan amount is not enough, a personal loan refinance might make sense.
When to refinance a personal loan
Here are some instances where it may make sense to refinance your personal loan:
- You can’t afford your current monthly payments: If you can’t afford to make monthly payments on your current personal loan, you can consider refinancing to get a longer repayment term and pay less each month.
- Your credit score improved: If your credit score has improved since you first took out a personal loan, you may be able to refinance to a loan with better rates and terms.
- You want to pay off your personal loan faster: Refinancing to a personal loan with a shorter term can help you repay your loan faster and pay less in interest. Just keep in mind that you’ll have to make higher monthly loan payments, so make sure you can afford to go this route before refinancing your personal loan.
You can refinance an Advance America personal loan
You can refinance several Advance America loans, including payday loans, installment loans, and title loans, in select states. Simply fill out an application online or in store in just a few minutes. If approved, you can receive the funds you need as quickly as the same day you apply so that you can pay off your current loan right away. Visit Advance America today to learn more about the loans we offer.
