If you need instant money, you may have considered a personal loan. They’re often faster to approve, but you can get high interests over a short period of time. Well, if you are expecting to receive money to pay on the scheduled due date let’s say in a month, or in less than two weeks-then go on. But, if you’re not sure, you may have to skip payment until your principal loan and interest charges balloon. In such a case, refinancing will be a better option.
Here are some of the key reasons why refinancing is a better choice than self-employed personal loan:
You need more debt to finance an existing need
Are you planning to expand your business? Do you want to cater to bigger clients, move to a more accessible location or possibly make some strategic changes in your business to optimize its growth potential?
Every business move means money. You cannot rely on sales and profits all the time. Doing so may jeopardize the financial health of your business especially if you have other debts to pay or suppliers to deal with. On the same note, if your collectibles are not sufficient to pay for your supplies and other operational costs, how can you expect that it can cover the amount you need for expansion?
Health problem is another type of need that may need your immediate attention. Nobody wants to get sick but no one is spared from getting one, either. You may be in the best of health today, but accidents and sickness happen. No matter how health-conscious you are, illness and accidents are sneaky culprits that wager on your finances. At times like these, refinancing can get you higher principal and longer loan terms, which you may need because you or your loved one may not be able to recover that fast.
Take advantage of a lower interest rate from a different lender or debt product
If you take a closer look at it, the self-employed personal loan is more costly than refinancing, especially if you miss payments. Imagine how a $100 loan at 10% each month cost after 3 months of nonpayment? At the end of the year, you may end up paying double or triple the amount of your loan, depending on the interest rates, penalties and number of times you missed payment.
Increase your overall borrowing with a new loan and lending institution
Refinancing increases your borrowing power. It increases the finance available for your personal and business needs. Each lending company has its own sets of products and service that may give you exactly the type of loan that perfectly fits your financial needs.
This increase in borrowing power is beneficial for entrepreneurs who are looking for ways to grow their business. It serves as a catalyst for business growth. However, you should ensure that, in taking on additional debt, your business is capable of making higher debt commitment. For that reason, it is essential to check your assets and liabilities; compare them with your current needs and make projections as to your capacity to repay your debts.
While there is nothing wrong in being optimistic that additional debt can boost your sales, generate more profits and bring your business at par with its competitors; it is not easy to get instant results. So, make sure you have enough money to cover for the first few payments before your business reaps the rewards of additional capitalisation from refinancing.
Another tip is to create a strategy to ensure that the refinance loan is targeted at generating a higher return of investment for your business. In a nutshell, use your debt wisely. Don’t waste it on areas that will not generate the profit you need to reach your business objectives and to cover the principal and interests of the loan.
Consolidate debts to restructure repayments
Varying due dates and interests are some of the causes of loan default. It’s not that you have no money. Sometimes, you may just be too busy to remember the date. If that is your problem, why don’t you consolidate your debts? You have an option to simplify the loan because instead of paying multiple lenders, you just have to pay one mortgage company. And, you can also enjoy the lower interest rate than all other loans combined.
When weighing between self-employed personal loans and refinancing, make sure that you understand the pros and cons of your option before you make a financial decision. A debt is an amount of money to repay with a price-which is not limited to the interest rate. It affects your overall health and your relationships with people. It changes your lifestyle and it can ruin your credit score. So, think before you submit your refinancing or personal loan form.
NSW Mortgage Corp helps you go through the product comparison process smoothly. If you wish to keep your borrowing options open and get favourable financial arrangements – call NSW Mortgage today!
