How to Know the Perfect Time to Refinance

There are many reasons why you might have taken out a title loan. Most often, it’s because of a financial emergency. You might not have had the time to make the right choice then, and that’s okay. But now, if you want to improve your financial situation, you need to use this opportunity wisely and check whether refinancing a title loan is right for you.

Refinancing will allow you to replace your existing loan with a new one. You can choose from a growing array of online lenders to refinance your title loan and save money on interest. Refinancing a loan might seem alluring, but there’s a possibility that things may go wrong again. Hence, the decision of getting a new loan needs some serious thinking. You can’t look at only one factor and decide when to refinance your current loan, especially when there are quite a few to consider.

Here are some instances when your refinancing decision is well-timed:

Interest Rates Drop

Fluctuations in interest rates are constant. Many people wait for the interest rates to fall and then get a loan to buy a new car or house. Like many others, you may apply for refinancing if the interest rate at which you borrowed the loan initially has declined even by 2 or 3 percent. This makes sense, but only if the interest drop and your refinancing decision take place at the beginning of your loan period.

You should check the total refinancing cost and your total gain in terms of money saved on interest, and only then make a decision.

Being Financially Stronger Than Before

A low credit score may not stop you from getting a loan but to qualify for a comparatively lower rate, you can improve it in time. One more factor that has been responsible for getting you a new loan at a lower interest rate is your debt-to-income ratio. It’s the ratio between the amount of debt you have and your overall income, which helps lenders to check your ability to make your loan payments. With an improved debt-to-income ratio, you know you will be able to handle your loan payment better and so does the new lender.

So, instead of waiting for the interest rates to come down, keep a constant check on your credit report and refinance your loan to obtain more favorable terms.

Too Many Mortgage Payments to Catch up On

EMIs seems the best way to buy something that you may not be able to afford by paying in full cash. But if you buy everything on equal monthly installment scheme, you might start feeling the burden of making multiple payments in a month. If refinancing can significantly lower your payment by lowering your interest rate altogether, you could be in a better position to manage paying the rest of your monthly installments.

It’s always better to make efforts to pay down debts with timely payments than to skip payments and fall in a bigger trap of bad credit.

Now that you know when it’s the right time to refinance, you should also know when to hold back:

Tricked by Long Loan Terms

You can be paying higher interest on your mortgage and feel that refinancing is the right option. The new loan could have longer terms with lower payments but not necessarily low interest. It could be to deceive you and not solve the primary purpose of refinancing, which is to be able to save money.

Don’t Bother When It’s Already Too Late

Just in case you don’t know, most of the mortgages are front-end loaded. Which means the interest makes up the most substantial portion of your monthly payments during the initial period of your loan term. If too much time has passed to refinance, you’ll already have to pay less interest and won’t be able to have more money to save.

Calculate the Exact Cost of Refinancing

If you get a new loan with a lower monthly payment, it may not be the best deal for you. You would also want to check the exact cost of refinancing as well as other factors like a new loan term and customer service quality, to name a few. It’s better to wait till refinancing your title loan makes the utmost sense for you and your finances.

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