Should you refinance your personal loan?

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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, updated on June 6th, 2023       

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Whether you have taken out a personal loan a couple of months ago or a year ago, circumstances change. You may find that your current personal loan is not sufficient to take care of your needs, which is why some people consider refinancing. Here are a few ways that need to be considered to see if refinancing is suitable for you.

1. You need more funds

There are times where you may find that your expenses increasing despite taking out a personal loan to handle them. Refinancing a personal loan can be one of the options you have to adequately take care of your expenses without going into the red. You could apply to have your personal amount increased instead of applying for a new loan altogether to save you time. However, carefully assess if an increase loan amount is what you need as this can affect your repayments.

2. Your current loan is not cutting it

It could be possible that you applied for the personal loan when you had bad credit. Bad credit loans tend to have restrictive features and fewer options. However, when you have improved your credit score you may want to switch over to a loan that is more suitable for you and comes with features that match your needs. This will be the perfect time to refinance or possibly compare lenders who will give you a loan that will off you the best value for your money.

3. Lowering your repayments

Your current loan repayments can have a huge effect on your budget. However, when you find that it is a tight squeeze every time to meet repayments then you could consider refinancing your personal loan. It could give you the chance of finding a personal loan that comes with a lower interest rate or flexible repayment terms that will be best suited for your finances.

4. You want to consolidate multiple debts

Having multiple loan payments and credit card debts that you have to pay off can be stressful, especially if each one has a different repayment date. You could consider refinancing to get a loan that can help you consolidate these multiple loans under one, which can also give you a single interest rate. This can help you effectively manage to pay off your loan.

5. You have calculated the financial implications

Refinancing may work for one person, but it may not work for the next. Therefore, it is vital that you carefully consider what it will do to your finances by using a personal loan calculator. Speaking to a financial advisor can also give you a clearer perspective on what will work for you. You may have to consider re-adjusting the way you spend money to make refinancing your loan work with your cash flow.

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