Life is full of surprises, for sure. One day, you’ll be a young, fresh talent starting at your new job. And before you realize it, you’re already a 30-something senior at your workplace with a 5 or 6-figure debt hanging on your head. Yes, this kind of turnout will really make you wonder how life can change in a flash.
Fret not, this is a reality many young adults face, and mainly because of two reasons:
- Inflation is real, and just existing in today’s world is expensive.
- Most of us weren’t really taught financial literacy at a young age. We only really learn about it after going through tough financial times.
So if you still don’t get where we are going with this, just know that we are not here to teach you about what you should and should not have done. Instead, we’re here to tell you about what you can do to resolve the money problems that’s plaguing your life right now. We’re going to tell you everything you need to know about refinancing — what it is, what it’s for, how it can benefit you, and whether you can apply for it in a day.
Defining Refinancing
You’ve probably encountered the term “refinancing” before but have little to no idea what it means. To cut the long story short, refinancing is a type of loan people take out to consolidate older debts that often come with high interest rates. A refinance loan can help you ease your immediate debt obligations. It may get you better repayment terms that are more aligned with your current income capacity.
There are a number of reasons why people would willingly take out a high interest loan and have no other choice but to sign up for micro loans with steep interest due to medical or personal emergencies. There are also others who may have overestimated their capacity to pay back their credit card debt in full. Micro loans and credit card debt are two types of debt that are notoriously known for their high interest rates, which can go up to 40–50% of the total loan amount per annum. A lot of people already know this but the instant access to fast cash is far too tempting to ignore during desperate times.
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This is where refinancing enters the picture. Applying (and getting approved for a refinance loan) can help you settle these high interest debts and extend your repayment period. This results in more manageable monthly installments that you are more likely able to pay for consistently.
If you find yourself in a similar situation and you are accruing bank-breaking interest due to loans, You have yet to pay off, refinancing is one solution that you can consider. Here’s why.
Why Should You Refinance?
We understand the hesitance that you might feel about the idea of taking out a new loan to take care of an older loan. However, the advantages that refinancing offers can really give you a big advantage if you want to become debt-free sooner. If you don’t expect to earn more than what you already are in the next 6 months, If you’re unable to meet your payments for the existing loans you have now, there is a pretty good chance that you will keep burning money on interest rates for who knows how long. If this is the case, it’s better to take your chances and apply for a refinance loan that may be able to offer you a lower interest rate than all your loans combined and simplify your repayment terms in the process.
Here are some advantages you can expect:
Lower Interest
If you are paying anywhere from 3% to 5% interest monthly on your existing debt obligations, consolidating them and having a good refinance company take on this debt for you can bring your interest costs down. Many refinance companies offer much more competitive rates compared to short term lending and credit card companies as they do want to encourage loan consumers to make the switch.
Extended Repayment Period
Also, applying for a refinance loan is kind of similar to renewing all the existing loans you have. Once your older debts have been settled and transferred under a new loan account, the date of your loan is also renewed. You may also apply to get your loan term extended to 3-5 years to help you manage your monthly installment costs. Paying in smaller installments may not help you become debt-free fast, but it will help you stay consistent.
No More Late Payment Fees
Paying for several loans that have different deadlines can be such a headache. With everything we’ve got going on in our day-to-day lives, I’m sure that thinking about your next due date takes up a lot of mental space. Sometimes, you might even forget to make the payments at all, which leads to even more debt brought on by late payment fees. If you refinance and pool all your existing debts to a single loan account, you only need to worry about one due date. It will definitely free up a lot of mental bandwidth for you.
Improve Your Credit Score
By being able to pay more consistently and on time due to having more realistic loan obligations. You can steadily improve your credit health, which probably caught fire while you weathered several high interest loans. Improving your credit score can really impact your relationship with financial institutions going forward.
Is It Possible To Get Refinancing On The Day?
Now, for the big question: Will you be able to get approved for a refinance loan within a day?
The answer is “unlikely but not impossible.”
There are companies that facilitate their refinancing application and assessment online, like this one right here. The key is to make sure that you do thorough research ahead of time and get the necessary documents ready so that when they ask for it, you already have it. Another thing that you can do to help you get a refinance faster is to start your application as early in the day as possible. Since it is online, you can submit an application before office hours even start.
Also, apply with your own bank (where you process deposits, withdrawals, and other loans). They can give you a big time advantage as they already have a record of your bank statements. The other important financial and personal data that they would need to proceed with your assessment, If you don’t have open debt cases or active payment notices, that is a good sign. Your application can process within 24 hours as well.
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