When you hear the word “refinancing,” you might typically think of a home mortgage, but you can also refinance a personal loan. If interest rates take a dip and you think you could save money in the long term, check around to see whether it makes sense to refinance. The minimal effort necessary to set the loan in motion might be well worth the interest savings you'll enjoy over the life of the loan.
Research personal loans through lenders. Visiting the BankRate website, for example, allows consumers to use a tool that searches for the best rates by location.
Contact your current lender; you may be able to negotiate better terms and rates simply because they want to keep your business. Contact other lenders you find that offer lower rates. Inquire about application fees, loan fees, term and interest rates. Take notes about each lender so you can compare.
Select the loan that fits your needs, paying attention to the term, interest rates and fees. Be aware that a longer loan period will almost certainly cost you more in interest over the term of the loan.
Apply for the loan with the lender of your choice. Some lenders may enable online applications, while others require hard copy applications. Fill out the application completely and accurately with all personal and financial information.
Submit the loan application with the lender, either electronically through the lender’s website, in person or by certified mail. The approval process might take up to 60 days, during which time the lender will verify your information and check your credit history.
Sign the loan papers after you receive approval. If you used the same lender for the refinance, the lender will use funds from the new loan to close the original loan. If you used a different lender, the new lender will wire the funds to the original lender to close the loan.
Request and receive account paperwork from the original loan, indicating that you have paid it in full.
- Enter your loan data into an online loan calculator. The information presented will help you determine whether the terms and rates of a refinance will save you money over the long term.
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