Finding the Right Time to Refinance a Loan
If you've been thinking about refinancing a loan, you might
wonder whether or not right now is the best time to do so.
There are a variety of factors which can influence whether or
not the timing is right for refinancing... national and local
interest rates, your credit history, and even the amount of time
that you've been making payments on the loan.
We'll look at each of these factors in a little closer detail,
so as to give you a better idea of what you're looking for when
trying to decide whether or not the time is right to refinance.
National Interest Rates
Interest rates fluctuate as time goes by, increasing naturally
over time as the cost of living and other expenses increase.
The base interest rates that all lenders must adhere to are set
on a national level, however... this is one of the ways that
governments work to battle inflation and try to influence
consumer spending if the economy stalls or slows down.
In periods where spending is rampant and prices are beginning to
rise, national interest rates might rise so as to slow down the
increase in prices due to overspending. If the economy has
reached a slower point, however, interest rates might be lowered
to encourage consumers to apply for low-interest loans.
Obviously, this is the best time to apply for loan refinancing,
since the interest rates that you'll pay will be lower and the
loan terms may be more flexible.
Local Interest Rates
Of course, interest rates may fluctuate locally just as they do
nationally. You might find higher or lower interest rates
depending upon where you live, and the difference between local
interest rates and the national interest rate might become
significant if your local banks see a need for higher interest
rates because of conditions in your area.
Before deciding upon a refinance lender, it's often a good idea
to check interest rates in other areas as well... the best time
to refinance is when your local lenders are closer to or below
the rates offered in other areas.
Credit History
As with your initial loan, the interest rates that you pay on a
loan refinance can vary drastically depending upon your credit
history.
While your credit score might well be better when you apply for
your refinance than it was when you applied for the original
loan, there's always the chance that you might have missed a few
payments to one creditor or another since getting the loan and
your score might have dropped.
Just because you've already gotten the first loan, don't think
you can ignore the importance of your credit history... make
sure that you take it into account when searching for a loan
refinance.
Time Elapsed on Loan
The amount of time that has passed since you received your
original loan can have a bearing on how much you pay on a
refinance loan. It can be frowned upon by some lenders to apply
for a refinance soon after receiving your loan... if nothing
else, it can show that you didn't take the time to research your
loan options before deciding upon a lender.
In order to avoid this problem, be sure to investigate all of
your options and compare the offers of several lenders before
deciding upon a loan.
If after you've received your loan and begun the repayment
process a major drop in interest rates or some other change
occurs, then go ahead and refinance... otherwise, it's best to
wait until at least a quarter of the loan has been repaid.
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