If you have heard the word refinancing or “refinansiering” in Norwegian, it is a facility that helps you combine all your debts and loans into a single loan. It is a process whereby all your various loans are revised, and the terms are replaced with a more favorable one. The result of this is that you can have a better grasp of your finances. You will only need to make just one monthly payment and you can have more funds available to you.
Oftentimes, a borrower seeks to have their loans refinanced when interest rates have fallen. Thus, they want to change the interest rate on their loan to something more favorable.
This in essence will also affect their repayment plan alongside other terms that are contained in the previous terms for the loan. When a refinance application has been approved, the applicant will then get a different contract that effectively replaces the previous ones.
Usually, refinancing differs from one lender to another, and the details may depend on the type of loans that you are converting. These can be a mortgage, credit card debts, auto loans and so on. By combining all these debts into one, you can handle your finances better. Refinancing at the end of the day will help to simplify your life and make you more profitable.
How it Works
If you have several small loans and need to pay up your installments as well as fees monthly, things can become quite confusing. You may get overwhelmed and might even miss deadlines.
By refinancing these loans, the lender gives you a new contract. This new contract combines all the debt and pays them off for you. So instead of having to pay up all the small loans, you focus on paying just one which is the revised one.
Just so you know, refinancing does not mean you do not pay your debts or the associated fees. It only means you are aggregating them and paying them via a single loan. You can modify the terms of your loan, but the original balance will still be in place.
To begin with refinancing, you have to apply for it at a lender or bank. This can be a lender that you have a previous loan with or a new lender entirely. Bear in mind that you can apply to different lenders before deciding which to go for.
The advantage of this is that you can compare their rates and go for the most favorable one. However, applying to many lenders one after the other can be difficult and tiring. You can easily do this by using a service that helps you apply to several lenders with just one application. You can check this website http://www.refinansiere.net/ for more information on this.
You should understand that your application is free and non-binding. You will receive an offer and you may choose to accept the offer or not. You have 30 days to decide on this.
What Offers Are Available?
After you have applied, the bank will evaluate and review your finances as well as your initial terms of credit. This includes the creditors that you owe, and the amount owed.
After reviewing your case, the bank will consider whether to offer you an unsecured or flexible loan. An unsecured loan is one without collateral and in this case, the bank takes over the borrower’s debt. A flexible loan on the other hand is when the bank gives you a loan account with an upper limit.
You may only access this maximum amount and use it to pay your debts or finance other projects. You decide the amount you want to take and pay for only what you have taken. You can let your lender know if you would prefer to use a part of the money for refinancing your loan. You may also want to spend all of it.
If you will be using only a part, the rest of the funds will be used as a repayment. It is advisable that you borrow just the amount of outstanding debt that you have. This will help you to save money.
It is also possible to refinance using your home as a security instead of going for an unsecured loan. It is most times cheaper. After a refinance, you will get an invoice every month instead of several. This will show the monthly deduction as well as the deadline for payment.
Reasons to Refinance
There are lots of benefits you can get from refinancing your debts. As you will only have to be servicing just one loan, you can easily keep tabs on your finances. On approval of your application, you get an overview of the loan and what the cost to you will be.
This is difficult to do when you have to deal with various small loans that have different interest rates and terms. In addition to these, you will often be in a better position financially. You can spread your repayments over a longer period and thus have money available to spend on other things than repaying debts.
With refinancing, you will be able to take on more loans. This can be to carry out projects such as refurbishing your house or getting equity for another one. Having to pay for just one loan also helps you psychologically and mentally.
You do not get confused or stressed about your repayments. You will only be dealing with just one which you can pay easily. You can see more reasons to do so from this article.
What Are the Conditions You Need to Satisfy?
Asides from checking the terms of your previous debts, there are conditions that you must satisfy to qualify for a refinance. First, you should have an income. The income required varies among lenders.
For most banks, the minimum is NOK 120,000 and may be as high as NOK250,000. However, some lenders may consider people with NOK100,000.
In addition to your income, you cannot have any payment remarks. Although a few lenders may allow you to refinance with remarks. Your total debt must also not exceed 5 times your total income.
Furthermore, you can only get a refinance if you are 18 years old and above. In fact, most lenders do not allow people who are not yet 20 years old to apply. The big banks typically target an age limit of 23 years and above.
Additionally, when you add your age and the loan repayment period, it must not be more than 80 years. Often for flexible loans, your age plus repayment period cannot be more than 65 years. For repayment loans, the maximum is 75 years.
Refinancing gives you the opportunity to consolidate your debts and pay them off easily and faster. It is cheaper in the long run and you may even be able to save some money.
If you want to refinance your debts, you should start by understanding your finances. This will give you an edge in your application. The more knowledge you have of your situation and how things work, the better for you. You should have an idea of your debt, your fixed income as well as your loan-to-value ratio.
You should take your time to consider various loan offers before deciding on your refinance options. You should choose one that is favorable and with lower costs that will not be expensive over time.