By: Karl S.

With the new year comes new opportunities – while this sounds cliché, it really is the truth!  In fact, it even expands into the world of finance.  It seems like new innovations are made every day, so it only stands to reason that this can be applied on a yearly basis as well, right? 

The concept that I am going to be covering today is not exactly “new,” but it has been refined to some extent in the past several years.  That is why I am discussing it, really – I find that not many people are aware of the fact that in some circumstances, you can refinance a loan on the same day that you apply to do so.

How does that work, you may be wondering?  There is a lot that goes into it, really, so I will be taking the time here to explain as much of it as I can.  While it may seem far off and nigh unobtainable at first, trust me when I say that it is not nearly as intimidating as it may seem.  For more information, though, make sure to keep reading!

A Deep Dive on Loans

Before we can discuss refinancing, we should probably cover the basics first: what are loans, and why have they become so important in today’s day and age?  You can check out a blog post like this one, https://economictimes.indiatimes.com/defaultinterstitial.cms, to get a bit of background information before we continue.  Another name for them is “credit agreement.” 

Looking at it in the simplest terms possibly, a loan is an amount of money that a lender allows a borrower to have based on a contractual agreement that they make before the funds are disbursed.  Several things are pre-determined in those documents, including (but not limited to) the interest rate, the length of the repayment period, and the amount of the repayments. 

There are a few different types of them, which you can probably expect.  Each has its own sort of niche that it fills, so before you decide to apply for one, you should determine what might fit your needs best out of them.  What are some examples of those, then?

Mortgages are probably one of the ones that we hear about the most since they are practically necessary for purchasing a home in today’s day and age.  The way that they work is that the lender (usually a bank) will pay for the property minus the down payment, which is what the lender will be responsible for.  Then, over time that money is gradually paid back.

They are far from the only type, though, and are probably not going to be one that you can get finished on the same day.  Another popular one is the auto loan, which are used in a similar way but for automobiles rather than properties.  Simple, right?

Student loans are not overly relevant to our discussion today either but are at least worth a mention.  They are not often refinanced, although it is possible.  Outside of the United States and Canada, they are not nearly as common.

Finally, we have personal loans.  Obviously, there are other types, but I am going to stick in the consumer loan category, so we will be concluding with this type.  These are for a myriad of purposes, including accomplishing things such as home improvement projects or even planning a wedding ceremony.  All of these types are good to learn about, as you can see in this article.

What is Refinancing?

Now that you know what loans are in a bit of a more comprehensive manner, we can shift our attention to refinancing.  This is, of course, the crux of our discussion today, and for good reason!  It is one of the most important things that we can learn about when it comes to credit agreements.  Why is that?

Well, it is in the very nature of credit agreements to be fairly long-term arrangements.  However, as this occurs, it is worth noting that the financial situations occurring around us will probably change.  Economics is far from a static field, and it does not hurt to always be paying attention to certain trends that are occurring.

The biggest example that I can think of is the fact that interest rates are almost constantly in flux.  This means that over the course of those several years, you are bound to see them get a lot lower than the ones that you agreed to upon when you first took out the loan.  That is when refinancing can really come in handy, although it is not the only answer. 

Rather, it is a convenient one that can end up being quite helpful when employed correctly.  There are even instances when you can get the application and approval process done on på dagen, or the same day.  That is probably where folks get most interested in them, considering the process can be quite quick in those circumstances.

Another reason that some people decide to go for them is to lower the amount of their current monthly payments.  This is another instance that can be the result of changing times and lifestyles – think about it for a moment.  When we initially make a credit agreement and sign a loan contract, we have to do so based upon our circumstances in that moment.

Sure, we can plan ahead to some extent, and I would certainly recommend that you do so.  However, some things we just cannot predict.  Losing a job or changing career paths might be one, or a tragic passing in the family, or anything, really – it is not exactly possible to get a crystal ball and plan ahead for all of those instances.

Thus, when they do occur, being able to refinance our current loans to reduce the strain on our wallets via lessening a monthly payment can be quite helpful.  In fact, it is in these situations that those same-day arrangements can be particularly critical.  After all, when we are in crisis, I think that most of us prefer to get some assistance with that as soon as possible.

How it Works

In practice, the application process is quite similar between applying for a loan and a refinancing agreement.  Of course, you will need to determine whether you want to find a different lender or if you would prefer to stick with your current one.  There are positives and negatives to each selection, so weigh those options carefully before deciding.

For example, your current lender will obviously know you a lot better and will probably be willing to hear you out in regard to the circumstances that have led you to seek a refinancing agreement.  However, a new one might be able to offer you a better deal when it comes to interest rates because they want to win a new customer.  It will ultimately be up to you to decide which will suit your needs better.

Beyond that, though, the documents that you collected for your initial application will likely be the same.  Before you do submit them, though, it does not hurt to take a glance at your credit score.  If it has improved in the time since that initial opening of your account, there is a higher chance that you will be able to negotiate more effectively for refinancing.  After all, you have proven to your lender that you are a trustworthy borrower.

Once you have applied, you will probably be able to discuss the terms with your lender and negotiate a new contract.  Read over it carefully before you commit, of course – that is solid advice no matter what sort of contract you are signing, really.  Just some things to think about, of course.

Make sure that you are not signing onto terms that are worse than the ones that you had before.  Be cognizant of the fact that your repayment period may be reset by this process, depending on the agreement that you make with your lender.  This tends to happen fairly often when you are lowering monthly payments or getting a much lower interest rate, seeing as the lender does still need to make a profit.

None of these things should dissuade you from pursuing this option, I simply want to point them out so that this is a comprehensive guide (at least, to the extent that it possibly can be).  With that being said, the positives do tend to outweigh any of the negatives that you can think of.  Think about the pressure that a lower monthly payment can take off of you, especially if you are in a stressful situation financially right now.

Hopefully, this article has helped to reduce some of the uncertainty and mysticism that surrounds refinancing.  While it is certainly not the easiest thing to understand, that does not mean that we should avoid it!

Next time that you are frustrated with the interest rate that you are being charged (especially if you notice that it is lower on average nationally), I hope that you think back to my words here today!  Remember that at certain establishments and financial institutions, you can even end up getting approved on that very day.

While it will not always happen, it is nice to know that we have that potential available to us.  In general, I think that spreading the word about refinancing is important – it can really help people, and it is a true shame that it is not discussed more often.  You can now walk away from this article as a better-informed borrower!