Debt Refinancing: 10 Tips
If you are looking for a way to lower your debts and pay them off more efficiently, you'll need to read about debt refinancing. 10 tips can really set you back on the right track to optimal financial health. There are a few things that you need to consider before jumping into any debt refinancing opportunity.
- Look at the long-term interest rate, no matter how great the short-term or advertised deal may be. Credit card companies often lure customers in with great 6-month interest rate terms, then spike up interest rates to far higher than the customer was paying before refinancing. The point of refinancing is to get a better deal and pay less money.
- Read the fine print on any offer for debt refinancing. You'll defeat the purpose if you don't carefully review the terms of the refinancing agreement. If there is something unfair, you need to spot it. Many credit cards get away with doing things by staying within the law, yet presenting a tempting short-term package. Reading the fine print ensures that you know what you are getting into with your refinancing package.
- Try to consolidate all your bills in one place that has a great interest rate. This is easier to do if you have good credit, but you may also be able to find a bank willing to work with you as well.
Shop around. Don't just go with the bank that you currently do business with or the first one that you see advertising a tempting offer. The Internet empowers the consumer, as long as you use it in an intelligent way. It enables you to do massive comparison shopping in minutes that could have taken hours or days before the Internet. Take advantage of this technology by comparing the interest rates and loan terms of all the banks and debt refinancing companies that you are considering.
- Don't apply for a lot of debt refinancing loans at once to see which one goes through. Every time that you apply for a loan or credit card, this is put on your credit report. The next company that pulls your credit report will see all the credit that you've recently sought. If a bank sees that you have lots of refinancing rejections, that may hurt your chances.
- Talk to bankers and debt refinancing professionals. You have to take what they say with a grain of salt, as many of them are likely to have a bias for their own bank, if for no other reason than they feel that they must be loyal. Yet, a lot of financial professionals have integrity and will level with you about your chances for getting debt refinancing through the company. If they say no, try another bank. It's best not to apply for places where you have a slim chance of acceptance.
- Consider your monthly payment. When you have debt refinancing, your monthly payments for all debts are typically greatly reduced into one monthly payment. However, just because you are now required to pay less toward your debt doesn't mean that you should. It's generally better to be debt free than to have savings and lots of debt.
- Remember that it's usually not a good idea to refinance your home to pay for a credit card or student loan debt. In uncertain times, you want to protect your home and major investments as much as possible. Speak to a financial advisor if you think that your circumstances mean that it's best for you to refinance your home to pay for smaller debts.
- Start tracking your expenses. Even if you are not the type of person who wants to establish a monthly budget that you must stick to religiously, simply start writing down everything you spend, perhaps on your smart phone in a notebook application. You'll be amazed at the costs.
- Opt for a refinancing institution that is not going to charge high fees. Ask about late fees, over limit fees and annual fees. Although most companies are going to have a late fee, many do not have a yearly fee for refinancing options (aside from the interest rate, that is).