We don’t need to tell you that it’s a bad idea to sign up for a high-cost loan. You knew it when you did it, but for lack of other options, you took the money that was available to you, knowing full well you would have a hard time paying it back. The good news is that you might be able to refinance your installment loan.
An installment loan is a fixed-rate, closed-end form of credit that you pay back in portions over time. Technically, any loan not paid in full all at once is an installment loan. While the term may refer to low-rate, personal loans, it is more often known for having:
Can you refinance an installment loan? Many borrowers ask this question after accepting cash advance at a high-interest rate and later improving their credit score. The short answer is yes. You may be able to renegotiate your terms or transfer the debt to a new lender with more favorable rates.
When Susan Boenau was leading the Consumer Affairs Section of the Federal Deposit Insurance Corporation, she explained the benefits of refinancing loans. She explained that you save money when you get a lower interest rate or a lower monthly payment.
That’s the main advantage of renegotiating debt – saving money. Another benefit is the convenience of combining several payments into one.
However, Boenau cautioned that “refinancing does not always equate to saving money or better terms.”
It’s important to make sure that the new rate is a fixed rate. Also, to save money, you will be able to pay back the loan before the end of an introductory rate. It’s sad, but some borrowers think they are getting a great deal on a refinanced loan only to find themselves paying more thanks to fluctuating interest and hidden fees.
Ideally, you will end up paying less for your refinanced loan. Of course, there can be less favorable outcomes. If you are looking to refinance a Money Mart installment loan or one from a similar provider, it is important to ask the lender the following questions to make sure you are going into the process with both eyes open:
Knowing the answers to these questions will help you understand the potential consequences of refinancing your loan.
Those payday loans with bad credit have fewer refinancing options. However, if you were paying back your loan on time, you may have been able to improve your credit score. Other ways to improve your credit score include having a good debt-to-income ratio, longer credit history, fewer hard credit inquiries, and a good mix of credit types.
If you are in a better situation now than you were when you took out the installment loan, one more of these refinancing products may be available to you:
You may feel trapped if your current contract has a prepayment penalty. However, you should factor in the cost of the penalty with how much you can save through a new loan. Switching may end up being the better option.
Paying back a high-interest loan is expensive, but it’s not always necessary. Can you refinance an installment loan? A lot of the time the answer to that question is a resounding “yes.” Even if you haven’t built a positive credit history since you took out the small installment loan, you can make small changes now to improve your credit score:
The first step toward a brighter financial future is getting out of debt. One way to make that easier is by refinancing your installment loan.