Interest rates have been very low for some years, which has in many ways benefited consumers. This has meant cheapest payday loans and the possibility of borrowing larger amounts. Since interest rates have been extremely low for many years, there is a good likelihood that they will begin to rise again within a short period of time. Therefore, it may make sense to consider whether you need to restructure your loan and lock the interest rate for a longer period – thus ensuring a low interest rate many years into the future.
Reschedule your loan – it can pay off
Refinancing your loan is especially sensible if you have taken out a mortgage and opted to lock in interest rates only for a single year – what is called an F1 loan. It is precisely when the interest rate is low that it pays to lock the interest rate far out in the future. This can primarily be done by choosing a fixed interest rate. This way, you are also quite sure how much you will have to pay each month and therefore avoid financial problems should interest rates rise. Although choosing a variable interest rate in the short term, a fixed interest rate is likely to secure a cheaper loan in the long term as you can benefit from the immediate low interest rate on the loan market. If, on the other hand, you do not want a fixed interest rate but hope to be able to score a profit by continuously renegotiating your interest rate, you may want to opt for an F3 or F5 loan, as there can be huge savings by locking the interest rate in three or five years to maintain your F1 loan.
It depends on your loan provider
However, there may be differences between what makes the most sense. For some providers, it is best to choose a fixed-rate loan, while others recommend an F3 or F5 loan. Therefore, it is a good idea to have a talk with your loan provider so that you together can find out what is the most optimal solution for you.
In any case, you should consider switching your loan or repayment loan, as this will most likely mean lower costs – and therefore more money between hands.