Managing debt has proven to be a challenging task for a lot of people. With personal debt being at an all-time high, individuals are increasingly seeking out ways to effectively manage their debt in order to live uncomplicated lives.
What is debt refinancing?
Refinancing a personal loan, Credit card or car loan can be an easy debt management tool where existing debt is replaced with a new loan in order to take advantage of new, favourable terms. Essentially, refinancing is taking out a new loan that is used to pay off the existing debt owed to a creditor and replacing the debt with a new one.
- A new credit agreement with lower interest rates which brings down the overall debt owed to a creditor.
- In some instances, a debt may be restructured to extend the repayment term, allowing for cheaper payment instalments.
- Consolidating multiple credit agreements into one loan which has the potential to bring down monthly repayments and overall interest paid.
Types of loan refinancing
Personal loan refinancing brings debt relief in the instance where someone has multiple credit agreements and wants to consolidate the loans into one payment plan, or to save money.
Loan refinancing is typically done where someone owes the creditor a final balloon or residual amount. Much like other types of refinancing, the final amount owing is settled and broken down into smaller repayments that are more affordable for the debtor.
When done correctly, and for the right reasons, debt refinancing can often be an effective debt management tool.
Ask us how we can help you to obtain a debt consolidation loan.