We, as humans, always strive for better options – be it a better car, better job, better home, or a better phone. Why, then, should you continue with your existing home loan if you have a better option available. With a quick loan refinance, you can easily shift your remaining loan balance to a lender that offers more attractive interest rates and repayment flexibility.
How does refinancing work?
Loan refinance works the same way a loan does. You analyse the loan features offered by different lenders and compare that deal with the terms of your existing loan.
When choosing a new lender, look beyond low home loan interest rates. Though it’s an important reason to refinance your loans, it’s not the only one. It would be best to look for loan deals with other features like zero prepayment charges, a quick application process, low processing fees, and flexible tenures.
Before applying, use a home loan EMI calculator to calculate your repayment dues, including EMI and interest. Besides, don’t forget to check your credit score. If it has improved due to your current loan, you can qualify for even better loan terms.
After choosing a lender, you will follow the standard loan application procedure. Fulfil the home loan eligibility criteria, submit the application form, and provide the required documents. Once the refinancing is approved and sanctioned, you can start with your repayments, albeit on better terms than before.
When should you opt for refinancing?
Here are some cases where opting for a loan refinance is considered wise.
- When you want lower interest rates
This is one of the primary reasons why people opt for a loan refinance. By transferring your outstanding balance to another lender, you can revise your interest rates and enjoy lower EMIs and improved financial flexibility than before.
- When you want to change your loan tenure
Your financial stability can rise or decline over the years. Therefore, a refinance can help you tune in your loan with your financial condition. If your financial strength has improved, you can shorten the loan tenure and pay it off early, reducing the interest amount.
Alternatively, if your financial stability has declined, you can extend your loan tenure via refinancing and lower the immediate home loan EMI amount.
- When you want to change the loan type
It often happens that after you opt for a fixed-rate loan, the interest rates drop. To leverage these reduced rates, you can refinance the loan and change it to a flexible rate loan. Moreover, if you wish to avoid market fluctuations, you can also change your loan from flexible-rate type to fixed-rate type through loan refinance.
To sum up
Refinancing helps borrowers manage the economy’s interest rate movements and changing personal financial scenarios smartly. However, a loan refinance comes with its own set of associated costs. So, don’t forget to crunch some numbers in advance, ensuring that these additional charges don’t exceed your savings.
