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What you need to know about refinancing a loan?

Now that you know you can get better terms on your loan…

Sometimes you find out that you can get a loan at better terms than you currently have. It may be because you were desperate when you took the current loan. It may be because you don’t have relevant information, like the variety of options that nairaCompare.ng gives you. But now you know you can get a loan at a better term, so it just looks absurd to continue to carry the burden of the current loan, with its onerous terms. It’s not just about the lower interest rate you can get, but also more favourable terms such as quarterly repayment, unlike current monthly repayment which does not fit well into your cash flow. You may be able to get a longer tenor which ensures the repayment amount is spread over a longer period, thus requiring a lower amount to service the debt, compared to the current loan which has a shorter tenor and higher monthly repayment. You can even get a higher amount.
The point here is that you now know that you can get a loan with better terms. Though it is always better to check for loan and provider options on nairaCompare.ng before you take the loan, it is never too late to correct your mistake, because it may help you make some good savings. In some cases, improvement in your financial conditions may be the reason you can now access a loan at better terms, but your current lender does not want to recognise such and revise your terms. Sometimes, it may be due to changes in the economic and market environment, such as a period of lower interest rate, which makes new loans more affordable, but your lender does not want to revise the terms of the loan. Be glad to know that you are not forced to be stuck with such a lender, just search for alternatives on nairaCompare.ng and take the next step to improve your loan terms.

…what next?

There is absolutely nothing wrong with getting a new loan that has better terms, with the purpose of paying off the existing loan. This is called loan refinancing – a situation where you obtain a new loan, with more favourable terms to liquidate an existing one. It is always useful to try to convince your current lender to revise the terms of your loan, but if this proves abortive, search for the best alternative. Don’t limit yourself, make an expansive search on nairaCompare.ng for the right loan at the best terms. Once you decide, apply for a new loan, and ensure you get the best terms ever possible.
However, before you draw down on the new loan or repay the existing facility, be sure that the savings you are making on the new loan is not wiped out by the prepayment penalty on the existing loan. It is important that you know most loans have prepayment penalties or fees, which is an amount that you pay if you choose to repay the loan earlier than the agreed tenor. Interestingly, when your current lender finds out that you want to refinance the loan, it may be forced to match the terms you got from the new lender, thus saving you the stress and early termination cost you would have incurred in paying off the existing loan. This means what started out as a refinancing plan may just end up as a renegotiation of terms on the existing loan with your current provider.
Also bear in mind that loan refinancing can also be used to avoid default on an existing loan, hence avoiding a situation that can potentially mess up your credit score. If you are concerned that you may not be able to meet up with your current loan repayment, why not apply for a new loan, with better repayment terms that match your cashflow reality. Refinancing a loan is not just about getting a lower interest rate, it may just be to get more favourable terms that fit your financial goals and present realities.

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