4. Consult with your present lender.
During the research process, don’t forget about your present lender. To keep your company, it may be eager to offer you a better deal than your current loan.
“You already have a relationship with that company,” adds Awumey. “Your lender will evaluate your circumstances and determine whether you are eligible for a new loan.” Many lenders will let you know if you are prequalified for a loan without performing a credit check.”
Take the following steps: Inform your current lender that you are thinking about refinancing your personal loan. Inquire whether you’d qualify, as well as the improved rate and terms they’re willing to offer.
5. Fill out the loan application
When you’ve decided on a lender whose offer you prefer, submit your application and any required documentation, which could include your Social Security number, paystubs, bank statements, or tax paperwork.
Keep in mind that the loan comparison process outlined before is not the same as submitting a formal refinancing application. To proceed with a loan offer, go through the loan underwriting procedure, and secure cash from your preferred lender, you must submit a formal application.
Take the following steps: Before accepting the loan, read the fine print carefully, noting your payment schedule and any fees, including prepayment penalties. If you agree to the terms of the loan, you can accept it and expect to receive funds within a few days.
6. Begin making monthly payments on your new loan.
You will use the cash from your new loan to pay off your existing debt once you receive them. This should be done as quickly as possible to avoid paying double loan payments or accruing excessive interest.
When you get your loan funds, you begin the repayment period of your new loan. With your new interest rate, payback schedule, and monthly payment amount, you’ll start making payments right now. Making monthly payments on time keeps your account in good standing.
Take the following steps: Set up auto-pay for your new refinance loan so you never have to worry about missing a payment.
What effect does refinancing a personal loan have on your credit score?
When you refinance, your credit will be checked. This may temporarily affect your credit score, but it should only be temporary – especially if you follow solid financial practices with your new loan.
Keep in mind that if you’re also wanting to buy a new automobile or move into a new apartment, even a minor hit could be detrimental. Car dealerships and landlords look at your credit score, and refinancing your loan at the wrong moment may make it more difficult to locate a vehicle or accommodation.