Published on October 30th, 2024
Consider a scenario where you took out a Personal Loan a while ago with high interest rates, and now you are feeling the pinch every month.
Each payment feels heavier than it should, eating into your budget and leaving you with less for savings and other expenses.
In such a situation, it is crucial to explore options that can alleviate your financial burden. One effective solution is to look into personal loan refinancing.
What Is Personal Loan Refinance?
Refinancing is a financial arrangement in which when you opt for a Personal Loan Apply Online or Offline option to close your existing loan.
The primary objective behind refinancing is to benefit from a favourable interest rate or flexible repayment tenure.
Let’s consider an example to illustrate this.
Suppose you have a Personal Loan of ₹5,00,000 with Lender A at an 18% interest rate, with a repayment tenure of five years.
After making payments for two years and with an outstanding balance of ₹3,00,000, you turn to a different lender who, based on your credit profile, offers you a loan at 14%.
Happy with the offer, you borrow ₹3,00,000 from them and use the entire sum to repay the outstanding balance of the original loan. This process is referred to as refinancing.
When To Refinance A Personal Loan?
Before diving into the “how,” let’s explore why refinancing can be beneficial for you:
- Lower Interest Rates: If your CIBIL score has recovered since you first took out the loan, you might qualify for a lower interest rate.
- Reduced Monthly Payments: Refinancing can extend your loan term and reduce your monthly payments.
- Debt Consolidation: If you have several high-interest debts, refinancing can help you consolidate them into a single loan, simplifying your payments.
Steps To Refinance A Personal Loan
Here is how you can proceed with a Personal Loan Apply online or offline option for refinancing.
- Step 1: Assess your existing loan terms and conditions to check if there is a provision for foreclosure. If there is, evaluate your finances to understand how much you need to borrow through a new loan.
- Step 2: Obtain a credit report from CIBIL or another recognised Credit Bureau to review your creditworthiness. If you believe that your credit score has improved over time or if there is no negative remark on the credit report, you can proceed with refinancing.
- Step 3: Research different lenders and their refinancing options. Choose one that not only offers the required funding but also has minimal processing fees, a flexible repayment tenure, and provides a prepayment option.
- Step 4: Once you have decided on a lender, gather the necessary documents. Typically, the lender requires you to furnish KYC documents.
- Step 5: Fill out the application form online or by visiting the lender’s branch in person.
- Step 6: If after the credit appraisal, the lender approves you for a loan and sends out the soft copy of the loan approval letter, review the terms and conditions. If you are satisfied with them, send your acceptance through a formal medium.
- Step 7: Your new lender will pay off your previous loan, and you will start making payments on your refinanced loan.
Conclusion
Refinancing may seem daunting at first, but by following the steps outlined in this guide, you can make the entire process hassle-free.
Remember, the goal is to find a Personal Loan that better suits your financial needs and helps you achieve your long-term goals. Moreover, you can opt for a Personal Loan Apply online option for a quick and hassle-free process.