When to Refinance Your Loan

In everything we do, we like to get good deals and bargains. That is why we like to shop during sales and always try to bargain with sellers. Having to pay a smaller amount or getting something more than what we bargained for is always a welcome possibility. When we have the possibility of getting a good bargain for our loans, we would like to have a go at it as well.

Loans can be refinanced, also known as refinansiering av gjeld. Normally we would get a better deal for refinancing now than we did in our old loans. Interest rates will be lower, terms will be shorter and amortization payment may be lower as well. That is how companies could get you to refinance your loan. They will try to sweeten their offer to refinance your loan as much as possible so you would want to do so. In turn, you will also be tempted to accept the deal because of the lower interest rate or other advantages that you will get out of it.

But before you decide whether or not to accept the offer, think carefully before you do so. It might not be the right time for you to accept the refinanced loan even if it does have better terms. When will be the right time to accept refinancing of your old loan? Here are a few indicators that you should look out for:

  1. There is stiff competition among different loaning companies and banks. Usually when there is stiff competition among competing companies, they will try to offer the best deals to outmatch their competitors. Some even package special offers to pirate clients of their competitors. It is usually a good time to refinance your loan when competition is tough because you know that the lowering of the interest rates or whatever sweet deal that they are trying to offer you stems from their need to get more customers. Sometimes you get seemingly sweet offers but they mask a lot of hidden charges that could be disadvantageous to you.
  2. You are at a time when your loan payments will increase. Not all loans have straight line amortizations. Some have staggered amortizations that could result to a larger amortization amount as your due date draws near. When this time draws near, it may be a good idea for you to refinance your loan to make sure that you do not get charged with penalties if you miss a single payment for your loan. And such a thing can happen especially if the amortization payment is really high.
  3. When refinancing costs are low. Sometimes, refinancing may seem like a good option because of the low interest rates being offered. However, what you may be unaware of are the high refinancing costs. This could include preterm nation fees that you have to pay to your old creditor for not finishing through the entire term of your loan. There may also be charges for processing your refinancing loan. So when you compute how much you have really spent on refinancing your loan, it actually costs more than choosing to stay on with your old loan.

Before you decide immediately on accepting the refinancing offer, try to assess if it really is the best time to refinance your old loan. This could prove to be an unwise decision.