If you have a good credit score, you can access all types of loans at affordable interest rates. However, if you have a poor credit rating, you will be restricted to a few loan products and get all at high-interest rates.
A bad credit loan is not a different type of financial product. It means a loan is taken out despite a bad credit rating. Of course, if the super factor is missing in your credit report, a lender will charge you a high-interest rate to minimize their risk of lending you money.
However, it does not mean that all lenders will charge outrageously high-interest rates. Some lenders provide you with an opportunity of refinancing your bad credit loan before you pay it off ultimately. Before you opt for this option, it is crucial to identify if this is going to help you save some money.
You must have heard refinancing terms, especially in the case of a mortgage. Small installments loans are also refinanced like a mortgage. Refinancing means paying off the whole of the current loan by taking out a new loan at lower interest rates.
It can allow you to take out a new loan at affordable interest rates because you have shown your financial commitment by paying down monthly installments on time.
This gives a boost to your credit score. Refinancing has become a very common term. Everybody thinks that it is an excellent way to save money without thinking about whether it actually saves money.
Short-term bad credit loans cannot be refinanced
Refinancing of a loan does exist, but not short-term bad credit loans can be refinanced. They are rolled over. Whether it is a cash loan or quick loans in Dublin, they all are small loans and can be only rolled over.
The repayment term for these loans is not more than two weeks, in some cases a month. You are to pay off the whole of the debt in a lump sum within that period. If you fail to pay off the loan on the due date, it does not mean that you do not have any options, and you will be immediately banged up.
The lender will ask you to roll over the loan in exchange for specific fees. When you roll over the loan, the payment period further extends for 14 days or a month. For instance, if you have borrowed €200 with €30 interest and decide to roll over the loan, the lender will impose additional interest of €30.
Before the rollover, you were supposed to pay €230, and now you are supposed to pay €260. It means as you roll over the loan, the interest quickly adds up.
Many of you think that a rollover is a suitable option, but it is understood that if you cannot pay off €230 within a stipulated period, you will never be able to pay off €260 in the next 14-day period.
Bad credit installment loans can be refinanced
If you have taken out installment loans with bad credit, you can refinance them to save money in interest. As the name suggests, you will pay down the debt in fixed monthly installments. The repayment term for such loans can extend up to a year, which is why they have a lower APR.
Refinancing can be an ideal option for such loans if you want to save money in interest, but at the same time, you need to calculate the total cost of your loan. Lenders may put you on a lower interest rate, but they may extend the repayment term.
The longer the repayment term, the more you will likely pay in total interest. Therefore, even if your payments are much more manageable after refinancing the debt, it does not make sense at all if you are paying more than you would if you did not refinance it.
This is why it is crucial to do your homework very well. Make sure that you have checked the reviews as well. You must know what other people have to say about the refinancing policy of the lender. You should also call customer support executives to know about the refinancing option.
The final word
It is clear now that refinancing is not possible at all in the case of small loans, but as far as it is about bad credit installment loans, you can go for it.
However, it is essential to note that this may not always be a suitable option because you can end up paying more money in interest despite smaller monthly payments. This is why it is suggested that you take on debt based on your affordability.
Calculate your affordability and then decide the borrowing amount. By doing so, you will never face difficulty in paying off the debt.
