A bigger number of people in the world are below the middle-class limit when it comes to economics, in fact, over 50 percent of world’s population belongs in this cadre, and this means that people are not having sufficient funds to deal with their living.
Loans are very good when they get used for a better purpose and also if you have a better plan of repayment, however, sometimes they can become too expensive to handle, this is because of the poor terms that you might not be comfortable with. The terms of a loan might change due to economic changes, for this reason, you would want to get better terms from elsewhere and that is how loan refinancing comes in.
What is loan refinancing?
This is a way of replacing your existing loan with a new one by paying off. The new loan that is replacing your existing loan always has better terms that are comfortable with you. This involves finding a lending company or individual who has better terms than your existing loan, they then pay off your loan and you start paying your debt to the new lender until it is done.
So what will happen if you refinance your loan?
Getting a loan and comparing them online here best money lender in Singapore is a very common way of financing a lifestyle one needs at least to make it comfortable. When you decide to refinance your existing loan, things will change a bit, there will be those favoring you and others which will still be a bother to you, here are some of the things that are likely to happen;
You will save a lot of money
The very big reason for refinancing your loan is because of the unfavorable terms of your existing loan, this is in terms of the interests being demanded on your loan, once you have found a new lender with a better deal; your loan interest will be lower making it affordable to you. This difference in interest, however small, it is very important as far as saving is concerned, for a long term loan; you will realize you have saved a lot of money each month before you are done with paying back.
Your loan time can be shorter
Refinancing your loan gives you a chance to cut down the duration of your loan repayment. Now that you will be paying with a lower interest, you can increase the installment and make some extra payments; this will cut down the duration you need to pay your loan. For instance, if you are supposed to pay your loan for a term of 20 years, you can double your installment payments and this will cut down the duration to 10 years or even less, the faster you finish paying your loan, the better for you.
you get more time for your due loan
Sometimes you might have the trouble of repaying your loan debt until you come close to your due date, instead of staying there and wait for consequences, you can go ahead and refinance your loan to a new one that will give you more time to repay it. This is common if you are relying on your business to pay the loan; sometimes the business might be at its lowest or on the loss side where you make no profit to finance your loan,and this will be the best option for you.
You will incur higher transactional costs
Refinancing your loan can turn out to be expensive when transacting it, first, you will be paying the existing loan in lump sum which was not the agreement hence you might be required to pay a penalty for that, however this depends on the terms and regulations of the loan company, other charges may arise from processing fee that must be charged and the origination fee. You should be prepared to meet this; however, if you don’t have the cash to take care of this, the new lender will take care of that and add it on your loan.
You will lose all the benefits
Loans normally come with some benefits you can enjoy, these will be taken away when you refinance your loan. For instance, some student loans might be partially forgiven if you have a career in the public service sector, that is, if your loan is still the original one you are repaying, this will not be possible if you decide to refinance your loan
You can consolidate debts
Sometimes, you might be having multiple loans which are from the same lender, you can be able to put together all these loans and make it one loan which you can focus on, this will be only able if you refinance all your loans and take them to a new lender which will be paid as a single loan, this will make it easy for you to keep track of your loan in a very easy way.
Lower your monthly payments
When you decide to take up loan refinancing, you will be able to pay your loan for a longer time than the previous loan, this means that your monthly installments will be lower if you decide to increase the repayment period of your loan, for instance, if you were to repay for ten years, you can decide to make it 15 which will lower your monthly installments as you pay off your new loan, this can be very convenient for you because you will stabilize your cash flow once again, however, this might amount to increased interests at the end of your repayment period because of accumulated interest for a long period of time.