Refinancing is defined as taking a new loan with different rate of interest or of shorter duration or with some new condition to pay off or replace an existing loan you have taken. You can go for refinancing for various reasons.
Some of the important ones are:
1) Lower Interest rate: The new loan available may be at lower interest rate and this will help you in reducing the EMI you are paying.
2) Faster pay-off: The new loan is available to you with a shorter duration thereby allowing you to pay off your loan faster.
3) Consolidation of various debts: You have taken various loans with different interest rates and pay-off period. You can go for refinancing and consolidate all these loans into a single loan. This will make it easier to track your finances and cash flows.
4) Immediate Cash: If you are going low on cash and need some fast cash for your current needs, you can go for refinancing. Apart from reducing your EMI burden it also helps in giving you some ready cash.
You should consider other/ hidden costs involved in refinancing like prepayment charges, closing fee, processing fee. These costs play an important role in deciding if the refinancing is worth it or not. Case may be that your new interest rate is lower than the one you were paying but one time costs such as prepayment and closing fee may make the overall refinancing a costlier affair.
We at KountMoney have an in-built tool that can actually tell if you should go for refinancing or not. Follow these simple steps to know:
1) Go to Loan Transfer Calculator
2) Provide your outstanding loan amount, EMI, interest rate and foreclosure or prepayment fee. You can also provide your new interest rate and tenure.
3) Get the detailed analysis for refinancing option.
And, as always, if you have any query regarding Re-financing or Personal loans just ping us at firstname.lastname@example.org.