22/12/2022
HOW TO REFINANCE/BUY OFF A PERSONAL LOAN
EVERYTHING YOU NEED TO KNOW!
Refinancing also referred to as buying off is a process where a borrower revises or replaces the terms of an existing loan by getting a NEW LOAN to pay for the existing one. This is usually done to make changes on the interest rate, tenure or other terms.
CAN YOU REFINANCE A PERSONAL LOAN
Loan refinancing or buy off is possible but the borrower will need to be eligible for the bank to approve the refinancing.
Borrowers with favourable CRB scores and repayment history are usually preferred by lenders. Regular income is also a necessary requirement.
REFINANCING A PERSONAL LOAN
Refinancing or buying off is a great option for an individual who wishes to get lower interest rates or reduce their monthly repayment amount. Personal loan refinancing helps you save money with lower interest rates, better loan agreement terms, lower fees and more time to pay off debt.
The major reason borrowers refinance is to get a more affordable loan as per their budget by tweaking repayment capabilities or loan structure.
WHEN TO OPT FOR REFINANCING/BUY OFF
1. When a lender offers attractive interest rates - Loans from microfinances and some unscrupulous saccos tend to have abnormal interest rates making them very expensive. Having a reputable bank refinance/buy off such loans would be a good option resulting in lower monthly repayments.
2. When a borrower's income has increased - If there has been a considerable rise in your income, you might want to clear off loans faster. If the borrower can afford large monthly payments, they can reduce the term of a loan by buying it off and choosing one with a shorter tenure.
3. When a borrower's income has reduced - If you face a pay cut, you might buy off to extend your loan term. Extending the term will lower your monthly repayment.
CONCLUSION
Refinancing a personal loan is a good option if it puts you in a better financial position by lowering your monthly repayments or shortening the term of the loan without additional charges.
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