Question
Q: What is loan refinancing?
Answer
A:
Loan refinancing means replacing your existing loan with a new loan, usually from the same or a different lender, under better terms. The new loan is used to pay off the old loan, and you continue repayment with the new loan agreement.
Why Do People Refinance Loans?
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Lower Interest Rates: To reduce the interest rate and save money on interest payments.
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Better Loan Tenure: To increase or decrease the repayment period based on affordability.
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Reduced EMI: To lower monthly installments by extending the tenure or reducing the interest rate.
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Change Loan Type: For example, switching from a floating rate loan to a fixed rate loan.
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Consolidate Loans: Combine multiple loans into one single loan for easier management.
How Does Loan Refinancing Work?
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You apply for a new loan with better terms.
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The new lender pays off your existing loan.
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You start repaying the new loan according to its terms.
Things to Consider Before Refinancing:
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Processing Fees and Other Charges: Some lenders may charge fees for loan processing or prepayment penalties on your old loan.
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Credit Score Impact: Applying for a new loan may trigger a hard inquiry, which can temporarily affect your credit score.
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Total Interest Payable: Sometimes extending the loan tenure reduces EMI but may increase total interest paid.
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Eligibility Criteria: You need to qualify for the new loan based on income, credit score, etc.
Is Loan Refinancing Right for You?
If you can get a significantly lower interest rate or better repayment terms, refinancing can save you money and make loan repayment easier.
If you want to explore refinancing options or get expert legal advice, feel free to reach out!
Learn more and get expert support:
Visit: www.legals365.com
Call: +91 9625961599
Advocate B.K. Singh and the team are here to help you!
.By Advocate BK Singh
(Delhi High Court)