At one point in your life, you’ve decided to take out a loan and finance something that your salary simply couldn’t cover. You might have tried saving money first, only to realize that it’s not going to work, and that one thing or another will always prevent you from saving enough. We’ve all been there, and we’ve all ultimately concluded that taking out a lån is the way to go.
Borrowing has most likely been the perfect solution for you at that particular point. As time went by, though, you’ve started wondering if you’ve made the right choices regarding lenders and interest rates. Or, you’ve found out that the situation on the market is quite different, and that you would have scored better rates and terms if you had borrowed a few months ago, or even today.
The market situation is not the only factor that can influence those rates and borrowing terms. Your credit score, for instance, plays a great role in this as well, and if you’ve seen improvements with it, you’ve also realized that borrowing now could lead you to better conditions. Yet, you already have a lån and there’s no way to change it and change its terms before the end of the repayment period. Is that really so?
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Fortunately for you, it isn’t. When you notice those changes in your financial situation, or on the market for that matter, you can do something to change the actual terms of your lån, or to “re-borrow”, so to speak. The thing you’re thinking of doing is called refinansiering, and you’re certainly not the only one who has thought about whether it’s possible or not. It is possible without a doubt, but you could, however, be confused about how it’s done, and that has to change. Learning exactly how this works is a must, and we’ll deal with that below.
How Does Refinansiering Av Lån Work?
What does it mean to refinance a loan? Essentially, refinansiering is the process of taking out a new loan with the goal of paying off the one (or more) you already have. It can be a great solution for people who want to consolidate debts, or for those who’re looking to change borrowing terms, such as shorten or lengthen the repayment period, or get better interest rates. There are two different refinansiering options to be aware of here.
With Collateral
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The first option to be aware of is refinansiering with collateral. If you know anything about borrowing at all, and you sure do since you’ve borrowed in the past, then you must have an idea as to what collateral is and how to borrow with it. I’ll explain that anyhow, just to make sure that you know what we’re talking about and just so you can check if this option could be right for you.
Collateral can be any asset provided by the borrower to the lender as a sort of a guarantee that the debt will be repaid on time. It’s like giving them something of yours to safeguard until you’ve repaid the debt. If you don’t repay it on time, the lenders will stop safeguarding the asset and they will, instead, seize it from you, at which point it will become their property instead of yours. Lenders require collateral rather often, especially so if you’re borrowing higher amounts, and if you don’t have such a great credit score to show for.
Refinansiering with collateral is basically the same as borrowing with collateral for the first time. You get a new loan to repay your old ones and get rid of your debt, but you offer an asset of yours as collateral. Your home, or another property, is often the asset that the lenders will want to have as collateral, so you would be risking a lot by taking out a loan like this and not repaying it on time. These companies know that, and they require collateral precisely because they don’t want their own risks to be high.
Without Collateral
The second option is for you to borrow without collateral. If you’re looking to refinansiere lån, but you wish to avoid the risks of losing some of your assets, then this is the option for you. You can probably guess how it works all on your own. Basically, you get a new loan without having to offer anything as collateral, and thus without worrying if you’ll lose that something if a certain unpleasant course of events makes you late for a payment. What’s in it for the lenders, though?
Clearly, the lenders have to protect themselves as well, as giving away money without collateral, i.e. without a proper security strategy in place, tends to be quite risky for them. Fortunately, they’ve thought of a different way to stay protected. They require people to have great credit scores when borrowing without security, and they set higher interest rates on such loans. So, refinansiering this way could be a bit more expensive, but it’s still a popular solution, given that no collateral is involved.
Is It A Good Idea?
Knowing the different refinansiering types and options you have is important and it will be quite helpful when you wind up needing to decide which one to use. The truth is, though, that you may be unsure of whether to do this in the first place. To put it differently, you don’t know if refinansiering is a good idea at all. There is no simple answer to that question, as it all depends on several factors, including your present financial circumstances.
There are instances in which refinansiering is certainly a great idea. Salary increases, credit score enhancements, and changes in interest rates are all great reasons to refinance, as they can lead you towards getting more favorable terms. A salary decrease could, however, also be a good reason to refinance, as you could want to lower your monthly installment and thus get some relief from a strenuous financial situation. If you’re not sure what to do, though, checking with experts is always a great move.
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