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Millions of people feel stuck in debt. You might be one of them. The weight of payments could be crushing your motivation and hope. You might be wondering how you’ll ever pay off your debts and where to start sorting through your financial mess. Or maybe you’re looking to refinance debt just to gain a little breathing room with your monthly bills.
A recent NerdWallet study revealed that the average American household with any debt owes over $136,000 in debt including mortgages. The consequences of such high debt levels range from minor inconvenience to financial devastation. High interest rates, long terms, hidden fees, and cumbersome payments and have led countless people to a fork in the road: refinance debt to gain some breathing room or pay it off early.
I know exactly how awful the weight of debt can feel. My wife and I were drowning in over $17,000 of student loan debt as recently as 2016. We were two of the lucky ones; we were able to trim our budget and lifestyle, take a few steps to increase our income, and pay off this debt in only 54 days.
Related Reading: How We Paid Off $17,000+ in Just 54 Days
But this isn’t reality for everyone. Your circumstances might not allow you to pay off debt so quickly. You could be in debt so deeply that even paying minimum payments or interest payments is stressful or very difficult. Perhaps you’re already on a bare bones, beans and rice budget and still find yourself struggling.
Maybe you’re reading this because you know that the chance to refinance debt could be your last hope.
Should You Even Bother to Refinance Debt?
Whether you have a car loan, mortgage with a high interest rate, home equity loan, or student loan debt, it may be possible to refinance debt and save thousands of dollars in the process. Unless you’re able to pay off your debts very quickly, you at least owe it to yourself and your family to see if you can save money by refinancing.
Please understand that refinancing debt is not a cure for the problem. When you refinance debt, you still have to pay it back. It’s addressing the symptoms, not the cause.
However, if you can pay back your debt on more favorable terms by refinancing, that’s a huge victory. It could reduce your monthly payments and free up money in your budget to pay down your debt much faster.
How to Refinance Debt and Jump Start the Payoff Process
The decision to refinance debt shouldn’t be entered into on a whim, but when done correctly, it has the potential to change your life forever.
Imagine a life with no debt and no obligations. Imagine sending the money that you currently pay to creditors directly into investments and watching your money grow each year.
How great would it be to never have to work again because your investments are generating enough income to support all of your family’s needs?
The sad truth is that you’ll never know what that feels like if you continue to be stuck in debt. If you’re ready to get serious about paying off your debt and want to pursue refinancing to kick start the process, read on.
Step One: Review Your Debt and Credit History Before You Try to Refinance
The best place to start is by collecting your free credit report and credit score. You need to know this information when the time comes to apply with companies to refinance debt. Many companies list their credit score requirements for those looking to refinance debt, so you’ll want to know your information before applying. Also, you want to be sure that there are no inaccuracies on your report.
You can get your free credit report and score in a matter of seconds when you sign-up with Credit Sesame. It is 100% free. They won’t ask you for your credit card information, and their service is secure thanks to advanced encryption technology.
The best part about Credit Sesame is that their report will help you examine the big picture of your debts and determine which ones are worth refinancing and which ones aren’t. Also, you’ll be armed with accurate knowledge of your situation, which will put you in the best position possible to negotiate with lenders.
Sign-up for Credit Sesame for FREE here.
Once enrolled, you’ll have access to your complete credit history, Credit Sesame’s report card system, and their customized advice to raise your credit score. If you follow this advice, you’ll put yourself in a better position for when the time is right to refinance your debt.
Step Two: Gather Multiple Options to Refinance Your Debt
Now that you’re armed with your credit report and scores, you’re ready to get down to reviewing your options to refinance debt and speed up the repayment process.
At the time this article is published, mortgage rates remain low but are on the rise. According a recent CNBC article, mortgage refinance applications have been on the rise in recent weeks due to a projected increase in interest rates. If you still haven’t taken advantage of these historically low rates, now is the time to apply and consider your options. You could save thousands of dollars over the life of your mortgage.
The quickest way to discover your refinancing options is to fill out a short form offered by GuidetoLenders. After supplying your zip code and a few other basic pieces of information, you’ll receive a list of free, no obligation quotes. You can start the process here.
Student Loan Refinancing
According to Student Loan Hero, Americans owe over $1.4 trillion in student loan debt, spread out among about 44 million borrowers, and you may be one of them. Depending upon the year you graduated, your repayment rates may be between 3.4% and 8.25%.
Again, refinancing debt isn’t the magical solution to debt woes, but it can speed up your repayment process significantly. I consistently find that Purefy offers the best look at refinancing options for people who are serious about saving money and getting out of debt as fast as possible. It takes a few minutes to fill out their quick form and receive quotes from multiple lenders.Click here to check out your student loan refinancing options with Purefy.
You should also check out direct offers from SoFi. If you qualify, you can receive a $100 welcome bonus when you complete your refinance. With current fixed rates as low as 3.375%, you could save thousands of dollars. Again, it only takes a few minutes to see if you qualify but you could save thousands of dollars.
Personal Loan Refinancing
Finally, if you have miscellaneous debt from credit cards, auto loans, or other higher interest personal loans, it’s worth checking out available rates on personal loans from two companies I recommend. If you’re dealing with sky high interest rates, you really need to make this a priority.
Prosper is a peer-to-peer lender that may be able to help you depending on your unique circumstances. In the interest of full disclosure, they can be very helpful to some people and not so useful for others. However, it is free to check your rates and it will not impact your credit score, so you have literally nothing to lose by checking out your options.
Another similar option is available through Lending Club. With APRs as low as 5.99%, you could save hundreds or even thousands when you refinance high interest debt. Again, checking out your options is FREE and won’t affect your credit score.
Note: Lending Club even offers options for investors, too.
Step Three: Put Refinancing to Use and Start Paying Off Your Debt – Fast!
Whether or not you refinance debt on your journey toward debt freedom, know this: you can pay off your debts much faster than you think you can if you’re willing to plan ahead and sacrifice. Refinancing your debts won’t solve your money problems, but it may be the spark you need to start the process of freeing yourself from debt forever.
Please, please, please – don’t look at refinancing your debt as the magic solution to money problems. Refinancing can be the jolt you need to pay off debt faster than ever if you’re willing to make lasting changes to the way you spend money. But if you’re not going to make changes, you’re just kicking the can down the road.
Be sure to revisit the resources above, gather a few quotes to fully consider your options, and develop a plan of attack today. Life is too short to continue on as a slave to debt.
Have you refinanced debt in the past? Do you have any debt that you could refinance to speed up the repayment process and save money?
If you’ve experienced a refinance in the past, tell us about the experience!
Taylor B saysMay 10, 2017 at 2:59 PM
Geez. It’s sad trying to find useful information in these overgrown affiliate weeds.
And readers beware. Most of the companies listed in this article are hungry hungry hippos, waiting to sell your information to the highest bidder. LendEDU blows up your phone and email with messages too.
Hero saysMay 10, 2017 at 8:56 PM
I’m surprised at your comment, Taylor. This post is intended to connect those struggling with debt with resources (i.e. lenders) who can help them. I’m not sure what you were expecting, but perhaps if you share with me I can create a post to address those ideas, too.
Also, LendEDU is very clear that they will do exactly what you described – connect users with loan options – in their terms of service.
Did you end up refinancing based on any of the offers they found for you?