Whether you have incurred a lot of debt on your credit cards, or you have a bunch of small loans to deal with, you are probably starting to realize that the situation you’re in is not very favorable financially. Quite on the contrary, you’re most likely struggling to make all the payments and chances are you’re starting to feel like you’ll never get out of the debt. Is there, however, a way out?
Fortunately for you, there is. Known as refinansiering, your way out consists of taking out a brand new personal loan and using it to repay all of those debts you’ve incurred. This will leave you with only one monthly payment to make, which will certainly lift a heavy burden off your chest, and off your wallet for that matter. So, why not grab that opportunity right now?
You are almost ready to do it. Why almost? Because there is one thing bothering you. Put simply, while you get the benefits of refinancing, you are not exactly sure what your options are and whether you can do this only by providing, say, your property as security to the lender, or if there is an option for you to apply for the loan collateral free. Getting an answer to that question will give you a push into the right direction, because you’ll understand your options and you’ll be able to decide what to do next.
Can You Refinance a Loan Without Collateral?
What you are essentially asking is whether you can take out an unsecured loan during the refinancing process, or if it has to be secured with one asset or another. Given that you have all those debts, you may be quick to assume that collateral will be required and that the unsecured loan is, therefore, not an option. I get where that may be coming from, but here’s the thing.
Refinancing a loan without involving collateral into the mix is actually very much possible. So, if you have no assets to offer as security, or if you simply don’t want to risk them, you can still use the refi option and get out of the debt that has burdened your finances. It is a possibility you can use.
Here is refinancing explained in general: https://www.valuepenguin.com/loans/refinancing-a-loan-what-it-means
But, Should You?
Now you know that this is an option, but there is still one question sort of hovering above your head. You know you can do it, but should you do it? If you’ve done some research on unsecured loans, then you know that they often come with slightly higher interest rates, given that they are not secured with collateral and the lenders have had to find a way to protect themselves better, given that it is essentially risky business for them. Since those rates tend to be higher, you are right to wonder if refi without collateral is actually the right move for you.
Let me make one thing clear. Even though those rates do tend to be higher on unsecured than on secured loans, they can still be quite reasonable. Meaning, of course, that the idea of refinancing without collateral is definitely a good one for a lot of people, given that they get the chance to get out of debt without having to risk their assets. Plus, for some people, this is the only option, because they may not have any assets to provide as collateral. In short, there is no reason not to go for this solution if you think it could be helpful for you and get you out of that debt.
How to Do It Right?
When doing this, though, you need to do it right. The point is not simply in getting a new loan, but in getting a good one that will resolve your debt problems and make your financial situation better. How can you, then, do this the right way? Let me tell you about the steps to take and things to do when aiming at getting the best refi solution for yourself. Apart from being sure the time is right for you to refinance, and you can learn some more about that here, you’ll need to be careful in the process of actually taking out the new loan, and I’ll now make it clear what you have to keep in mind.
Boost Your Credit Score
Your credit score has an impact not only on your eligibility for the loan, but also on the interest rates you’ll get. Meaning, it dictates whether you will get approved, and it also dictates the rates that the lenders will offer. If you want to get better interest rates and thus an overall cheaper refi solution, you will need to work on boosting that credit score first, before applying.
Find a Few Lenders
Apart from that, you’ll also need to take your time to find at least a few different lenders that will be ready to work with you. Plenty of those operate on the market and it is your task to choose the right one. Refinansiering av lån uten sikkerhet is a process that has to be done with the right lender, because the overall quality of your new unsecured loan will depend on that lender.
Compare Their Interest Rates and Other Terms
Speaking of quality, there are terms you have to compare when choosing the lenders. Those include, apart from the interest rates, things like processing fees, late fees and basically anything else that the lenders may charge for. Comparing those is bound to help you figure out which lender could be best for you, which will bring you much closer towards the actual step of applying.
Choose Your Repayment Period Smartly
While applying, you’ll have to decide on the amount you want to borrow, and I am guessing that you have a good idea on how much money you need to cover those debts. Additionally, you will need to decide on the repayment period as well, and it is important for you to do that smartly. Don’t choose a period that is too short if you can’t handle the monthly payments, but don’t go for one that is too long either, because you want to get out of debt as soon as possible.