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Can I Refinance My Debt?


Congratulations, you’ve now paid off a big part of the total debt. That’s great news. Your credit score has improved and you might be thinking if you now can refinance the remaining debt at a lower interest rate. There are several things you need to consider before you opt to refinance so that you don’t make a financial mistake.

Lender Limitations

Go through the loan agreement and read the terms of loan carefully. Among other things, there would be a mention of any restrictions, if applicable, on refinancing loan. There are lenders who allow borrowers to refinance their debt immediately. At the same time, there are companies that don’t allow borrowers to refinance their loan till certain years have passed, and this might also include refinancing from legal money lenders Singapore and not only banks and other financial institutions. That’s why it is a good idea to read and understand refinancing restrictions before you take out a new loan.

Refinancing Fees

When you are refinancing a loan, don’t only look at the interest rate of a new loan. Of course, a lower interest rate is inviting, but if you are blind to other factors, you might end up paying more than you would pay without refinancing even with a low-interest rate of the new loan. Some companies charge the borrower a penalty in case they pay off their loan early. In some cases, the penalty could be substantial enough to make refinancing an unviable option. Apart from this, you also must consider refinancing fee. If the fee is huge, you might find yourself paying more as refinancing fee than what you would save on count of low-interest rate.


The amount of money you owe is not the only thing which lenders consider. They also check your annual income. In case your annual income is less than what it was at the time you took the original loan, the new lender might not offer you an attractive interest rate. In such a case, refinancing doesn’t make sense, at least not until your annual income has increased to what it was before, if not more.

Credit Score

Another thing at which lenders look at before passing an application for loan refinance is credit score. If at present your credit score is lower than what it was at the time you took the original loan, it wouldn’t be such a good idea to go for loan refinancing. This is because lenders in all likelihood will reject your application. And even if they approve it, they will not offer you a lower interest rate.

However, you shouldn’t feel utterly disappointed if your credit score is not up to the mark. If you manage your finances properly and stay disciplined, then you can gradually improve your credit score. When your credit score improves, lenders will be more open to offering you a new loan at a lower interest rate.