Are you wondering when the best time is to refinance loans? Refinancing your personal loan, in the right circumstances, can be a great way to smartly pay off your debt and save money.
When you refinance a personal loan, you replace your existing loan with a new one. You may be able to refinance with the same bank or lender as the original loan — if it offers refinancing — or with a brand-new lender.
If you’re approved for a personal loan refinance, the lender will provide you with a new loan with new terms that you can use to pay off your previous loan. There can be advantages and disadvantages to this, and in some cases you may see a negative effect on your credit scores.
If you’re refinancing for a longer loan term, one potential disadvantage is paying more interest, even with a more attractive interest rate. A longer loan term means you’re paying interest for longer, too. Your lower monthly payments could come with a higher total interest price tag over the life of the loan.