When you refinance your renovation loan, it means you take out a new loan to repay the existing loan.
Refinancing your renovation loan can be a great way to reach your financial goals faster. If you find a better deal with a lower interest rate or you wish to consolidate multiple debts, refinancing can work to your advantage.
The two main reasons people choose to refinance their renovation loan is to take advantage of a lower interest rate or to consolidate debts. Rolling together outstanding credit cards and other renovation loans into one simple repayment each month makes your budget easier to manage. And by locking in a more competitive interest rate, you could clear your debt faster while saving money!
Everything in moderation
So, why not refinance every time a better deal comes along? It might sound like a good idea, but refinancing multiple times will impact your credit score.
The aim of the game is to keep your credit score as high as possible so that you’re more likely to be approved when you apply for a loan. When you take out a loan of any kind, your credit score decreases slightly. This is okay, as long as you make repayments on time and pay back the loan by the due date.
However, repeated applications for a loan within a short time frame could harm your credit score, making it more difficult to obtain a loan in the future.
But remember, refinancing a renovation loan is always better than defaulting! If refinancing a loan helps you stick with your repayment schedule, you might even improve your credit score in the process.
Are you eligible to refinance?
Tick the boxes before you start! To refinance your renovation loan, make sure:
You are aged 21 or over
You are an Australian citizen or permanent resident
You have a regular source of income that you can demonstrate
You have a good credit history
To see if you qualify for a Plenti renovation loan, you can get a RateEstimate. It only takes 1 minute and won’t affect your credit score. We will simply ask you a few questions so we can calculate an initial estimate of your borrowing potential, along with the rates, fees and charges that may apply to your loan.
Before you refinance
Spend a little time doing your homework before you take the plunge:
1. Check your credit rating. You can do this online for free through government financial guidance site Moneysmart, or financial comparison sites like Canstar.
2. Check the comparison rates of various loans to find the most competitive option.
3. Calculate the cost of an early repayment fee (if there is one) on your existing loan and establishment/upfront fees on your new loan.
4. To see if you qualify for a Plenti renovation loan, you can get a RateEstimate. It only takes 1 minute and won’t affect your credit score. We will simply ask you a few questions so we can calculate an initial estimate of your borrowing potential, along with the rates, fees and charges that may apply to your loan.
What will it cost?
If you’re looking to refinance, you’re probably seeking a loan with the lowest interest rate. But what about those hidden costs that can catch you off-guard? Shopping around for a renovation loan with fewer fees can save you thousands in the long run.
Here are some of the extra charges that could apply to your new loan:
· Establishment/upfront fee: You could be charged a fee when you apply for a renovation loan to cover the cost of assessing your application and preparing loan documents.
· Service fee: Monthly account keeping fees add up over time. It’s worth calculating the total cost for the life of the loan so you’re not caught by surprise.
· Late payment fee: Your lender may charge a fee if you default on your loan or miss a payment.
· Early repayment fee: Do you hope to pay your loan off sooner? Seek out a lender who doesn’t charge an early repayment fee so you’re not penalised for your stellar efforts.
· Other fees: Check out the terms and conditions of your loan for a full list of fees and charges.
Comparison rates do the hard maths for you by rolling together the interest rate, upfront fee and service fee into one percentage figure. This means the comparison rate will be higher than the interest rate charged on the loan. In Australia, lenders are required to show a comparison rate when they advertise an interest rate.
It’s a helpful tool when researching the cost of the loan. It allows you to compare loans to find the perfect one for you. But remember, a comparison rate doesn’t include early repayment fees, late repayment fees or deferred establishment fees.
Refer to the terms and conditions of your loan if you’re unsure about these extra charges.
Refinancing is as easy as 1, 2, 3
1. Get your rate: Discover your personalised interest rate in just 1 minute. It’s fast, simple and won’t have any impact on your credit score.
2. Apply in 10 minutes: Make sure you have your driver’s license or passport, an address verification document (like an electricity bill), bank details and existing loan documents handy. You will be asked to verify your income and expenses and may be asked for bank statements or payslips.
3. Enjoy your funds: Once your loan is approved your funds will be with you the next business day.
What do I need to apply?
Refinancing your existing renovation loan is easy.
First, to verify your identification, we’ll ask to see one or more of these documents:
· Australian state or Territory-issued driver’s license
· Australian or foreign passport
· A document proving your address, such as an electricity bill
Next, we need to assess whether the loan you’re applying for suits your current life circumstances. To do this, we’ll look at your:
· Employment stability
· Repayment history
· Credit rating
We will ask for bank statements and/or payslips to verify your income and expenses.
Lastly, you will need to provide the following documents to verify your existing loan:
Current loan statement showing the last 12 months of transactions
Loan payout letter from your existing lender
If it sounds confusing, don’t worry. We’ll remind you of all the documents you need to provide during the loan application process.