Refinancing your loans could be an ideal option especially if you intend to lower your debt level and the costs of keeping those. You should look for, choose, and obtain only the best refinance products. Take note that there are currently too many of those options across the Australian market today. You may find it hard and confusing to select and get the best refinance product for your condition.
Before refinancing or considering it, review your current loan contract. Pay more particular attention to the provisions in fine print. There could be terms and conditions about fees and penalties imposed for paying out your loan earlier than the maturity. If such charges would cost more, it is better to set your refinance option aside. If not, you may proceed. Experts from within the lending industry are sharing several insights on how borrowers could take advantage of refinancing.
When to refinance
Refinancing could be more advantageous if you could possibly lower interest payment by about 0.50% or more. If your current loan is significant, such savings on interest payments could get more tremendous. Try to find out your break-even point. Consider how long you intend to repay the loan amount.
You also need refinancing if you are at risk of possibly falling into a more serious default.
Before refinancing, you should re-consider choosing between fixed rate and variable rate refinance loans. Choosing the more appropriate loan could mean so much to your finances in the long run. If the economy is bearish and interest rates tend to be volatile, fixed rate refinance loans could be protective of your welfare. Otherwise, variable rate loans could be better as they could help you keep interest rates practical. Take note that no-cost or low-cost refinance loans could be misleading in the long run. Basic fees may be waived to entice borrowers. But you could eventually find out that such loans usually impose higher interest rates. Beware because some refinancing loans offer lower interest rates on an introductory basis only to raise them drastically in the long term.
Talk with your current lender
It is also in your best interest to set discussions and negotiations with your current lender first. You may talk about possibly waiving any early exit fee implemented. Or you could discuss any competitive refinancing loan offered and provided. Why jump to other lenders when your current loan provider is more than willing to retain you? To do so, expect it to offer you more attractive terms for refinancing. Lastly, have the right reason to refinance. It is not always advisable as refinancing could extend the life of your loans. Use this option only when needed and only when there is a need to save on costs.
Andrew has been working in the finance industry for several years specializing in refinance solutions. .