5 Things To Know Before You Refinance Business Loan

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5 Things To Know Before You Refinance Business
Loan
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A small business owner can also refinance
business loan about which not a lot of them are
aware of. Many borrowers go with a set and forget
approach they forget about the loan once the
EMIs are paid and the tenure ends. But there are
some business owners who want to upgrade their
loan with the growth of their business, i.e. they
want to top up their loan. A business owner can
also refinance business loan if he is in need of
more funds even after availing the loan and
during its tenure. Refinancing business loan may
qualify him to avail loan at a low-interest rate
and at better terms and conditions.
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What is Business Loan Refinance?
Refinancing business loans means proceeding with
another loan with the same lender while paying
off the existing loan. The new loan comes with
cheaper rates and terms and conditions. Also, if
you avail a new business loan, you can pay off
the existing loan with its amount and start EMIs
for the new loan. In a nutshell, you adjust the
existing loan EMI amount with the new loan amount
and get the new loan at better terms and
conditions. Many loan lenders offer a top-up
loan. A business owner can avail the same
services.
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Things to consider while Refinancing Business Loan
One can certainly take benefits from availing a
top-up loan. However, there are several
considerations that the business owner must make
before availing the facility. The following are
the considerations
Ascertain if the lender offers Top-Up Loan
Before putting time and efforts in processing
top-up loan, ensure that your present lender
offers this facility. Some loan lenders do not
offer this facility while some offer. If your
lender does not allow you to refinance loan, you
may not be able to get the top-up loan.
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CIBIL Score Think Twice
Every credit activity or loan availed has an
impact on the CIBIL or credit score which also
includes refinancing the loan. This facility
closes the door of the previous loan account and
opens the door of a new account. Availing a new
loan may impact CIBIL score, negatively or
positively. You need to take this into
consideration as well.
Compare Interest Rates
The next point to consider is the interest rate
offered on the loan. Refinancing loan takes a lot
of time and effort. And if the lender offers to
top-up loan at a high interest rate as compared
to the previous loan, it does not make any sense
in availing the facility. The borrower must get
the facility at low interest rates and better
terms and conditions. Low loan interest rates
will lighten the burden of EMI amount.
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Comprehend where your Current Loan Stands
If you are facing a hard time paying your current
loan, availing a new loan will only put a hole in
your pocket. However, if you want to merge two
loans and extend the loan tenure, the EMIs amount
will also be lowered down which certainly would
be helpful. Refinancing business loan is not a
good option if you want to save money since new
interest charges (even if lower than the
previous) will be added.
Processing Fee
It should be understood that availing a top-up
loan is like availing a new loan. So charges like
processing fee and file charges will be levied
again. You will have to pay a couple of charges.
So, if you are availing a top-up loan, you can
also use the EMI calculator to check the EMI
amount.
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