Many people look to refinancing when they feel as though their current form of lending is not fitting in well with their finances. All kinds of loans can be refinanced, including personal loans.
If you are considering refinancing an existing personal loan, one question that may be going through your head is whether you will need a credit check. The short answer to that question is yes, most lenders will require a check credit when refinancing a personal loan.
How a credit check will impact the personal loan refinancing process will vary from one lender to another. Here is more information about credit checks when it comes to refinancing a personal loan and the role that credit plays.
Why Do Personal Loan Lenders Check Credit When Refinancing a Personal Loan?
When looking to refinance, personal loan lenders will look at credit for several reasons, here are a few of the major reasons why they do so:
- It will give them an idea of how you’ve handled past debt and how you will handle a new loan.
- It will help them figure out your reliability.
- It will let them know how much existing debt you have.
When Will a Credit Check Have an Impact on Refinancing a Personal Loan?
Refinancing a loan will involve taking out another loan and transferring the debt from the existing one onto the new one.
When it comes to choosing the new loan, there are two main types to choose from:
- Secured Loan—This is where the loan is secured with an asset, such as a car or a home.
- Unsecured Loan—This is where the loan is not secured with an asset.
With secured loans, lenders may or may not perform a credit check. Credit score and credit history will not be a huge factor when determining eligibility for a secured loan because the lender has the security of the asset.
With unsecured loans, lenders will check credit. Credit will play a big part of whether or not a borrower will qualify for the loan.
What Characteristics of The New Loan Should I Look for When Refinancing a Personal Loan?
When looking for a new loan to refinance an existing personal loan, it may be helpful to know what characteristics are considered positive:
- A lower interest rate
- A flexible lender who better fits your finances
- A better suited monthly payment/plan
- A loan that offers more convenience than the existing one
From the list above, it becomes clear that the main point of refinancing a personal loan, or any loan, is to make the entire process of lending easier and ultimately lower the cost of borrowing funding.
What Kinds of Loans Can Be Used to Refinance a Personal Loan?
There are several kinds of loans that can be used to refinance a personal loan:
- Another Personal Loan—This is funding that can be used for a variety of reasons, these loans can be either secured or unsecured.
- Car Title Loan—This is a type of secured loan, where the asset involved is the vehicle. Generally, car title loans are not a great idea for refinancing a loan, because their interest rates tend to be pretty high.
- Home Equity Loan—This is another type of secured loan where the asset is the borrower’s home.
- Credit Card—These can be either secured or unsecured types of lending.
- Payday Loan—These are loans that are secured from the borrower’s paycheck.
Do I Need Good Credit when Refinancing a Personal Loan?
In order to refinance an existing personal loan, a borrower does not necessarily have to have good credit. But if you are someone looking to refinance with poor credit, it is extremely important to find a lender willing to offer you a competitive interest rate despite low credit. One way to find that is to look at several lenders for different kinds of loans.
This where MaxCash may be able to help, instead of being a lender ourselves, we work with several reputable lenders across the nation. Our job is to be the middle-man between a potential borrower and potential lender, and to educate those who are looking for funding.
We deal with all kinds of lending, including personal loan refinancing. To see if you qualify for the personal loan refinance process through us, start by giving us a call at 1-833-207-9052 or sending us an email at email@example.com.
With any kind of lending, a person may want to change things up after borrowing, this is where loan refinancing comes in. This process may be done for all kinds of lending including personal loans. When refinancing a personal loan, a credit check will be part of the application process, but it does not always have to part of the eligibility process.