A common mistake many people make is that they get a loan and then do nothing with it other than making the required payments until it is paid off. Of course repaying the loan is must be done but the terms for doing so does not have to remain constant. Every year things in your life and at the financial institution that gave you your loan change and these changes can save you a lot of money.
Each year on the anniversary date of you loan you should begin the process of refinancing your loan. The first step to refinancing you loan is to obtain a current copy of your credit report. There are many reasons for examining your credit report annually other than just to refinance a loan. On average one out of four credit reports contains incorrect information and this information can result in you paying a higher interest rate than you deserve. A standard practice with lenders is to add a few percent of interest onto your loan to increase their profits. If you haven’t seen you credit report you will not know what a fair amount of interest is for you to be paying thus weakening your negotiating power.
Once you know what you should be paying it is time to go shopping. Shopping for a loan can be a tricky proposition and must be done carefully. First select one or two local lenders and one or two online lenders that you may wish to work with other than your current lender. Examine the services that each company offers and make a list of what options you would like to have that you currently do not have.
Now that you know what you should be paying and what services you would like with you loan it is time to get some quotes. Select one local lender and one online lender and seek a quote from them. Make sure you clearly tell them that you would like to buy out your existing loan. You must be careful to only do this once a year and with only a few lenders especially if there is a risk of you being turned down for the loan. Having multiple credit checks on your file in a short period of time can lower your credit rating especially if you are turned down by any of the lenders.
Now that you know what you can get from a competitive company it is time to actually refinance your loan. Refinancing your loan is a bit like playing a game of poker since you looking for the best deal and do not wish to lay all your cards out on the table. Begin by asking your current lender what they can do for you with out telling them what the other companies will do for you. Your current lender should be willing to lower your interest rate since you have been paying your loan for at least a year thus making you less of a risk to them.
Let your current lender tell you what they will do for you first. Your current lender may well offer you a better rate than what the other companies have offered you. If this is true than your work is done but if they do not then you need to negotiate. Let the person you are working with know what you are seeking and give them an idea of what other companies where willing to do for you. If your current lender wants to keep your business then they will undoubtedly work with you to find a comparable option and if they don’t then all you have to do is give the OK to either of the companies that you have already spoken to.
As you can see refinancing your loans is a win-win option for you. Doing so once a year will ensure that your credit report is accurate, will save you money on your payments, may provide you with better options on your loan and can actually be fun. Make sure that you take the time each year to examine your loans and ensure that you are getting the best deals possible and are paying the least amount possible.