Refinancing is the process of taking a second personal loan to repay the first one. It is one of the best ways to make your loan repayment affordable and feasible while overcoming your existing debt situation.
You can opt for refinancing when another lender is offering a lower rate of interest than your current one. Many a time, you can also refinance your loan with your current lender.
Some lending institution provides additional financing options for an existing borrower. For example, Bajaj Finserv provides their pre-approved offers to such customers. These offers come with home loans, business loans, personal loans, and several other financial services.
Refinancing enables you to transfer your outstanding loan balance from your current lender to a new one.
Here are a few advantages to personal loan refinancing:
1. Improvement of CIBIL score
Applying for an unsecured personal loans may require you to have a CIBIL or credit score around 750. Refinancing your existing loan will help you improve this score.
Some other ways to recover it: -
● Pay your loan EMIs in time.
● Pay your credit card bills within the due dates.
● Always try to pay the total amount due on your credit card rather than the minimum amount due.
● Keep your credit utilisation under 30% of your assigned credit limit.
● Refrain from applying for multiple loans.
2. Lower your existing debts
You can opt for low interest rates on a personal loan through refinancing by lowering your existing debt. Lenders prefer a Fixed Obligations to Income Ratio (FOIR) of 50% or below. The FOIR is the ratio between your fixed monthly payables and your income.
Lowering your FOIR can make you eligible to get lower interest rates when you refinance.
Why should you apply for refinancing?
I.You want to reduce your EMIs
The apparent reason to opt for refinancing is to lower your EMIs. You can also do so by lengthening your loan tenure. Although your EMIs will become affordable, you will have to pay more interest in the long-run.
II.You find lower interest rates from another lender
You may come across a lender who offers you lower interest rates on personal loans. There are numerous financial institutions in India, and that has given rise to the competition too. Hence, it can be considerably easier to get affordable rates.
Things to keep in mind before refinancing:
A. You will have to pay additional charges
Your current lender will charge a fee for allowing you to transfer the loan balance to a new lender. Furthermore, you may have to pay an origination fee to the new lender. Origination fees are deducted beforehand, and hence, you will not get the total amount approved.
B. You may need to submit your documents
The new lender may ask you to submit all the necessary documents required for personal loans. This can include KYC documents, proof of business and address, salary slips, audited business turnovers, bank account statements, income tax returns, etc.
C. The new lender can seek other eligibility criteria
The new lender can also require additional personal loan eligibility criteria when refinancing. You need to match those pointers before transferring your existing loan to the new lender.
Refinancing helps you manage your current financial situation without hampering the credit score or your financial future. You can consolidate multiple loans under one refinance option and streamline a single EMI for total loan repayment. Follow the things mentioned above, and you will be able to overcome the financial crises effortlessly.
You can opt for refinancing when another lender is offering a lower rate of interest than your current one. Many a time, you can also refinance your loan with your current lender.
Some lending institution provides additional financing options for an existing borrower. For example, Bajaj Finserv provides their pre-approved offers to such customers. These offers come with home loans, business loans, personal loans, and several other financial services.
Refinancing enables you to transfer your outstanding loan balance from your current lender to a new one.
Here are a few advantages to personal loan refinancing:
1. Improvement of CIBIL score
Applying for an unsecured personal loans may require you to have a CIBIL or credit score around 750. Refinancing your existing loan will help you improve this score.
Some other ways to recover it: -
● Pay your loan EMIs in time.
● Pay your credit card bills within the due dates.
● Always try to pay the total amount due on your credit card rather than the minimum amount due.
● Keep your credit utilisation under 30% of your assigned credit limit.
● Refrain from applying for multiple loans.
2. Lower your existing debts
You can opt for low interest rates on a personal loan through refinancing by lowering your existing debt. Lenders prefer a Fixed Obligations to Income Ratio (FOIR) of 50% or below. The FOIR is the ratio between your fixed monthly payables and your income.
Lowering your FOIR can make you eligible to get lower interest rates when you refinance.
Why should you apply for refinancing?
I.You want to reduce your EMIs
The apparent reason to opt for refinancing is to lower your EMIs. You can also do so by lengthening your loan tenure. Although your EMIs will become affordable, you will have to pay more interest in the long-run.
II.You find lower interest rates from another lender
You may come across a lender who offers you lower interest rates on personal loans. There are numerous financial institutions in India, and that has given rise to the competition too. Hence, it can be considerably easier to get affordable rates.
Things to keep in mind before refinancing:
A. You will have to pay additional charges
Your current lender will charge a fee for allowing you to transfer the loan balance to a new lender. Furthermore, you may have to pay an origination fee to the new lender. Origination fees are deducted beforehand, and hence, you will not get the total amount approved.
B. You may need to submit your documents
The new lender may ask you to submit all the necessary documents required for personal loans. This can include KYC documents, proof of business and address, salary slips, audited business turnovers, bank account statements, income tax returns, etc.
C. The new lender can seek other eligibility criteria
The new lender can also require additional personal loan eligibility criteria when refinancing. You need to match those pointers before transferring your existing loan to the new lender.
Refinancing helps you manage your current financial situation without hampering the credit score or your financial future. You can consolidate multiple loans under one refinance option and streamline a single EMI for total loan repayment. Follow the things mentioned above, and you will be able to overcome the financial crises effortlessly.
No comments:
Post a Comment