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.
What is Business Loan Refinance?
also read: how to refinance a business loan?
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.
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.
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.
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.
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.
Refinancing business loan will undoubtedly allow you to manage your loan account effectively. However, you need to take a well-informed decision. And the aforementioned points will definitely help in the same. Additionally, you can also register your business for free at the Connect App by ZipLoan to build your business network. Through the e-marketplace, you can create a business profile, list your products/services, find business, discover new business opportunities, and build connections.