Will Refinancing a Personal Loan Lower My Monthly Payment?
A personal loan is a type of loan that makes funding fairly easy to obtain and has little to no restrictions on how funding may be used. If you have already taken out a personal loan and are having trouble making payments, you could consider refinancing.
Refinancing a personal loan allows borrowers to receive lower monthly payments. Here is more information on refinancing a personal loan and how it can impact the monthly payment.
How Does Refinancing a Personal Loan Work Exactly?
Before taking the step to refinance a personal loan, it is important to know how the process works. Refinancing is a transfer of the remaining balance of an existing loan—in this case a personal loan.
In addition to the monthly payment amount, some other factors of the loan may also change. Here are the changes you might see after a personal loan is refinanced:
- The Length of the Loan—This is how long a borrower has to repay the loan. By the end, the full amount should be paid back.
- The Repayment Terms of the Loan—These are the terms in the contract that both you and the lender agree on before a contract is signed.
- The Value of the Loan—This is simply the amount that the lender gives out, the more the borrower pays off with their original loan, the less amount they have to refinance.
Refinancing a Personal Loan Can Lower Your Monthly Payments with the Length of the Loan
When a personal loan is refinanced, you could acquire more time to pay back the loan or shorten the length of the loan. Borrower’s looking to lower their monthly payment usually extend the length of the loan to accomplish that.
However, it is important to keep in mind that the longer the loan, generally the more it will cost, as the interest adds up. So before extending the length of the personal loan, make sure to consider the cost, and if it is worth the lowered monthly payment.
New Repayment Terms Can Loan Lower Your Monthly Payments
The repayment terms of a refinanced personal loan will encompass a few important aspects:
- The Minimum Amount Due— When it comes to the minimum payment amount, some lenders will have a lower requirement than others. So, switching lenders/loans could help with lowering the monthly payment amount.
- Any Fees Associated with the Loan—Many lenders will have some kind of fee(s) associated with their personal loans, and some may have more fees than others. Refinancing a personal loan by switching lenders can have a huge impact on any additional payments that are added to the monthly loan payment.
- The Interest Rate of the Loan—The interest of the personal loan will make up a huge part of the monthly payment. When refinancing a personal loan, a change in the interest rate is another huge advantage that can come from the process.
This can occur if you are able to find a new lender who has a much more competitive interest rate, or if you are able to refinance with better terms, through their existing lender.
Changing up the repayment terms can definitely help lower the monthly payment of the loan.
How Your Credit Score Can Impact Whether Refinancing Will Lower Your Monthly Payment
You credit score and finances will play another important role in determining whether refinancing your personal loan will be worth it.
Generally, the better ones financial standing and credit score, the more beneficial refinancing will be for them.
This is because those with better credit typically receive better rates and repayment terms with a personal loan. Having better terms also means receiving a lower monthly payment when compared to borrower with poor credit.
Can MaxCash Help Lower My Monthly Payment When Refinancing a Personal Loan?
At MaxCash, we have tons of experience with refinancing all types of loans—even personal loans. Instead of giving out loans ourselves, we work with several lenders. Because of this, we can offer our customers tons of unique advantages with the lending process:
- We offer extended hours throughout the week and weekend.
- Our lenders could offer competitive interest rates.
- We could work with all kinds of finances.
- We can help throughout the personal loan refinance process.
If you have a personal loan and want to lower your monthly payment, consider personal loan refinancing. There are a few ways in which refinancing a personal loan can lower the amount you pay every month. Before deciding to choose this route, it is important to understand that refinancing is usually only beneficial for those who currently have good credit/finances.