It is hardly a secret that the past two years have been quite trying for many of us. This is especially true when it comes to finances and how we handle them. While some parts of the world have put holds on loan payments (such as the federal student loan freeze in the United States of America), other regions offer alternative options.
In Norway, there are plenty out there. The key is knowing where to look and how to go about it. Even making the decision on what to do and when to do it can be challenging to parse out. I know that it’s hard for me to admit when I need help.
Our financial well-being isn’t the place to get nervous when needing assistance, but many of us still feel that pressure. There is stigma to taking out loans or using a credit card, even when that isn’t entirely justified. Credit scores are a thing, after all – and you need to have some experience in the credit world before you can get better rates on interest and repayment plans.
Today, I’ll be covering the issue of refinancing. Generally speaking, this largely applies to loans. There are a few other niche areas where it might be applicable, but I’ll be focusing on this today to keep things simple. The jargon that comes with this sort of thing, as you can see here, is already difficult enough.
If it’s something that you’ve been considering but didn’t fully understand, make sure that you stick around today. I’ll be offering up some insights on how to go about it, and why it might be beneficial for you – especially if you have several loans or debts at once.
What is Refinancing?
Let us start here, with the main crux of our discussion today. What is refinancing, how does it work, and why should you consider it? The first of these questions is the simplest, of course. It involved consolidating your debts into one account, as opposed to having them spread out across several different lenders.
Usually, this is an option for anyone who takes out a personal loan. What is that you may ask? It is when a lending company provides funds to an individual who has undergone an application process and has demonstrated their ability to repay. Thus, they are dispersed the money, and pay it back based on the terms of their contract.
When you do this often, though, it can lead to having many payments to make each month, potentially at high rates. This is when something like refinansiering uten sikkerhet comes into play, particularly in Norway. That being said, you might be wondering how you can go about this.
Often, this is the step that sets most of us back. It can be difficult to locate a provider that we see as trustworthy, given some of the mistrust surrounding many financial institutions. Banks may not seem like the ideal place to store our money anymore, let alone a space where we would consider borrowing money.
There are many websites out there that exist that provide personal or private loan information and funds. One way you can determine if they will be a right fit for you is to go through a process known as pre-qualification. You most see, inquiries in this field might leave an impact on your credit score.
There are hard and soft inquiries when it comes to these things. The former is what can leave a mark on your score. Essentially, a company is “pulling” your information from the bureaus to determine if you are a trustworthy borrower. Many loan and credit card inquiries will leave a blemish on your report for a few months.
Meanwhile, a soft inquiry generally does not impact your score. So, a soft one like pre-qualification is generally a more ideal way to check if you qualify, if you can do that. Plenty of companies send out letters and emails saying that you are pre-approved for cards or loans, so locating one likely will not be that big of an obstacle.
While those hard pulls generally do not have a huge impact on your score when they appear one at a time, something to keep in mind is that you should not approve several of them at once. You see, that might make a lender believe that you are a high-risk consumer, as you are applying for multiple credit cards or loans at once. You can read up on that more here: https://www.creditkarma.com/advice/i/hard-credit-inquiries-and-soft-credit-inquiries.
Weigh Cost versus Benefits
This is a step that you should not overlook. When you open a new account, be it for refinancing or otherwise, usually there is some sort of fee involved. What does that look like?
Well, opening accounts can sometimes entail an upfront fee. Additionally, many require minimum payments or deposits each month. This means you’ll want to do some number crunching before you decide to go through with this.
Compare your monthly payments now with the cost of opening the account and what your new monthly payment would likely be. Try to determine if the investment is worth it by seeing how long it would take for that initial deposit to pay off, for example. If you are having trouble doing this on your own, there are professional financial consultants who can likely help walk you through it.
How to Use it
What you will want to do once you get approved for refinancing is use the new account to pay off the outstanding balance on your previous one(s). So, if you owe one thousand euros to one company and the interest rate is astronomically high, you can use a loan of this amount to pay off the previous one and enjoy a better rate of interest.
That is just one example – there are plenty more out there of course. Some lenders will not leave it to you and will pay off the other financier directly. It all depends on where you borrow from and what rules and regulations are at play.
Start Making Your New Payments
This one is a bit obvious, I am aware, but it is still worth noting. Once you have the new account, you will need to start making the new payments. Hopefully, they are more reasonable than the previous account you were paying off, and the interest gives you a better rate.
That is the primary goal of refinancing after all – to get a better deal when you can. It isn’t worth it to start one if you will be paying more in the long term, so just be mindful of that. When you’re applying and sorting out how it will work, ask for speculative numbers on what your new monthly statement will look like.
This should give you an idea of what you should be anticipating as you pay. Much of this step will be between you and your lender, so there is little other guidance I can offer here. Just be sure you ask plenty of questions along the way – they should be able to answer them for you if they are reputable and knowledgeable.
Confirmation Regarding the Previous Loan
The final thing I’ll note here is that you should make certain that your previous account is closed. This is to ensure that you are not being billed double each month, and to reduce the burden on your credit score as well. It’s very important, so don’t neglect to double check. You’ll thank yourself later if you do catch any mistakes.
Is This Worth it?
If you’re someone who is looking to improve your own financial health, or perhaps you own a small business, it may be something to consider. I can’t tell you whether it will absolutely be worth it to you – that is a personal decision you will have to make.
That being said, there is a certain amount of guidance that I can offer. Look for lower interest rates, for one thing. If you will have a higher rate from a refinancing account, it’s probably not going to be worth it. If it’s lower, though, you may want to investigate how this works.
Additionally, do not sign on for monthly payments that you cannot handle. If the term of the new funds is shorter than your previous one, examine it critically. Ask what your new bill will be and decide if it is worth it for you. If it will be significantly higher than the previous one, it again likely is not worth it.
Despite those negative examples, there are plenty of other interactions and examples that we can look at to see that usually, a loan like this is worth it. If you’re living in Norway and looking to own a business or already have one, you may be familiar with this topic already.
If you are, hopefully you are aware of the strides many companies are taking in the country to improve accessibility to credit cards and loans due to the economic impact the COVID-19 pandemic has had there and across the globe. It is important to keep contextual details in mind as you proceed, as they do influence how high or low interest rates will be.
Again, I can’t really tell you what to do. I can, however, offer you this article that hopefully has provided you with some value insights into how this process works. If it is worth it for you, I hope you are able to find a good lender with a solid reputation and low interest rates. That’s the dream for many of us!