Can you lower your loan payments after you get the loan? The answer is yes, and I’ll tell you how.
So if you’ve heard of debt refinancing, but never really understood it, listen up. Debt refinancing basically means that you can replace your existing loan agreement with one that could be more beneficial to you. But it’s not a guarantee, and not everyone will be able to do it!
So maybe when you first got a loan, your credit was really bad, you had a low credit score, lots of missed payments and just not a good history. Your interest rate was probably very high because the lender took a big risk on you.
But fast forward a couple years, and you’ve gotten much better at managing your loans, you’re paying on time, you’re paying more than the minimum payment and your score has gone way up. Your lender might agree to refinance the debt with lower interest rates.
And this can go the other way too. Maybe you find yourself in a tight spot and can’t meet the monthly payments anymore. You can meet with your lender and ask to refinance the loan. This could reduce your monthly payments, but you might also have to extend the duration of the loan and possibly also increase your interest rate.
You could also seek to refinance if you notice that interest rates generally are a lot lower now than when you got the loan. In the US, the Federal Reserve sets the benchmark for interest rates approximately every six weeks. The Bank of Jamaica does the same on a similar timeframe. So interest rates can change several times a year, and it’s your job to monitor them, and take advantage when rates fall.
However, debt refinancing isn’t one size fits all, so be sure to think through your options and talk to your financial advisor!
Learn more debt management strategies in my Debt Do Over course! Click here to access it!