Beste Refinansieringslån- Tips for Choosing the Best Refinancing Loan

Accessing credit get easier as the days go by; you can get as high as NOK 800,000 in consumer loans without collateral. This ease of obtaining loans has many advantages but it can also be a big debt trap for a lot of people. Imagine being able to access NOK 800,000 in 5 places without the commensurate income to carry the repayment obligations. 

The above scenario has led many people into what we call a cycle of debt. Being in a situation where you have more debt than income can be quite stressful and not a healthy situation for any one in all ramifications.  There are a number of things that you can do to get out these debts, but the most popular option that is recommended is refinancing. 

In this article, we will examine the concept of refinancing and how to choose the best personal loan for this purpose; so stay with us especially if you have multiple debts.

What is Refinancing? 

Refinancing is the process through which an existing loan or loans are replaced by one single loan with better terms and conditions.  This process is also often described as debt consolidation. Although in real financial context debt consolidation and refinancing are not exactly the same, but for the layman, the concept is the same. 

So a refinance or refi agreement is sought to enable the borrower get credit facility with terms and conditions (especially interest rates and repayment durations) that are more favourable. 

There are many reasons why a borrower will want to seek for refi or debt consolidation and they include the following:- 

1. The interest rate environment has changed significantly in such a way that the borrower can save money on interest rates. 
2. To avoid getting a payment note on overdue debts.
3. Their financial status has improved and they have better credit. 

Factors that Affect your Qualification for Refi Loan

Much as we say that debt consolidation or refi is one of the best options to get out of multiple debts or an expensive or unfavourable credit agreement, it doesn’t come that easy. There are many factors that qualify or disqualify a borrower. Some of the factors are as follows:- 

1. A borrower that is 25 years and above with a minimum annual income of NOK 250,000 stands a good chance of getting refi without security.   However, those in the age range of 18 and 25 with less than NOK 250,000 annual income stand less chance of qualifying for refi with many banks. 
2. The size of the amount applied for also determines whether the application will be approved or not. So you may meet the minimum requirement and still not be approved based on the amount that you are asking for. 
3. Your credit score can also affect your qualification for debt consolidation. If your credit score has improved over time, you stand a better chance than one whose credit score did not improve over the duration of the other loans that they seek to refinance. 

In the case of refinancing a mortgage, factors that can affect your qualification are many and they include:-

1. DTI Ratio 
2. LTV Ratio. You can visit https://www.consumerfinance.gov/ to understand this point better. 
3. Home Equity
4. Income Stability 
5. Type of Loan 
6. Condition of the Property 

Pros and Cons of Refinancing 

Although we have said that refinancing is a smart way to get out of unfavourable debt agreement, it still comes with some drawbacks. That is why it is important to explore the pros and cons of this process so stay with us as we do so.

Pros 

Refinancing or consolidating your debt can be beneficial in many ways and they include the following:-

1. Quicker Debt Repayment – With refi loans, you can pay of your loans faster.  This means that you get to pay less interest at the end of the day. Additionally, when you pay your debts off quicker, you can pursue other financial goals. 
2. Lower Interest Rates– You can get lower interest rates when you go for refi, depending on the repayment terms, your credit score and other market factors.  
3. Your Finance is simplified – Imagine that you have multiple payments on credit and debit cards, instalment purchases and other consumer loans. Most people often forget to make one payment or the other in such a case. However with a refi or debt consolidation, you merge all the debts in one and your monthly payment is simplified. This makes the process of monthly budgeting easier for you and lessens the likelihood of you missing any payment. 
4. Clear Payment Schedule – From the foregoing, one payment per month gives you a clear picture of how much you have to pay every month and the date for your payment is fixed. This makes it difficult for you to miss any payment. Additionally, your payment schedule is fixed and the interest rate remains the same throughout the duration of the repayment. 
5. Improved Credit Score– You are most likely to make payments and on time with only one payment on your schedule. This will with time improve your credit score. 

Cons 

1. Upfront costs may be high
2. You may inadvertently end up paying higher rate
3. Missed payment will set you back farther than you were before the refi. 

Tips for Getting the Best Refinancing Loan

Having seen the pros and cons of refi loans, you would do well to consider carefully whether that is the right course of action to take. If you decide that going that route is the best option for you, the following are tips to help you make the right decision:- 

Avoid Fraudulent Lenders

There are lenders that are only concerned about roping people into more debts just to make money. For this reason, they go as far as telling borrowers that they can get them out of debt no matter the amount they owe. This is just a bogus claim. 

Other things to look out for and avoid include:- 

1. A company /lender that is not licensed 
2. A lender that asks you to sign documents with blank spaces. 
3. A lender that will not discuss your repayment plan. 
4. A lender that wants to rush the transaction. 
5. A company that will not put the entire cost and interest rate of the loan in writing before asking you to sign. 
6. A company that arranges a business loan for you instead of just the basic consumer credit that you asked for 

All the above are red flags that the financial institution or company is not legit and would not give you the best. 

Ensure that your Payments are Cheaper/Less 

Before you sign the dotted lines for a new credit agreement, ensure that you have compared all the fees and costs that come with the loan with the existing loan. Be sure that you can comfortably make new payments and that the new loan is cheaper. 

Using a Loan Comparison Calculator

These are digital resources that help you compare the fees and interest rate of the new loan with your existing credit. These resources are usually free; you can click here to go to the website of one of the independent companies that help you effectively compare loans. This is by far faster and more accurate than you manually reviewing one lender after another. 

Use the Same Parameters for Comparison 

When looking at different sites and comparing different loan offers, ensure that you are using the same parameters. Some of these parameters include:- 

1. Every fee that comes with the loan such as application fees , valuation fees, legal fees stamp fees. 
2. Early payment penalties 

Conclusion 

Taking out a refi loan is not something that should be done without due consideration of several factors. We have mentioned a number of them in this article and also given tips on factors to consider. Bear the information shared in this piece in mind as it will help you make an informed decision.