Loan refinancing

If you have a lot of expensive debt, it may be a good idea to take out a loan for refinancing. An overdraft on your account and loans from different lenders cost a lot of money each month because you pay compound interest. It can quickly become expensive if you lose track of your finances. Debt refinancing means paying off your debt in a smarter way. If you choose to refinance your debt by consolidating it into a new loan, you can achieve significantly lower overall costs.

With a new loan that can be used to pay off all your other small and medium-sized loans, you can consolidate all your loans with a single lender. This is more financially manageable as you only pay interest on one loan. In this article, Nanofinans shows you how to proceed with debt refinancing.

What is refinancing?

Refinancing is something you may hear and read a lot about these days, but most people do not fully understand what refinancing actually is. Simply put, refinancing is the process of combining several loans under one and the same lender. To truly understand what refinancing is and its benefits, more than a short explanation is needed. This article will give you a better understanding of what it means to carry out a refinancing.

Refinancing is a method that can be used to pay less in monthly loan installments, gain better financial overview, and at the same time have a longer repayment period on the loan. There are therefore many benefits that come with refinancing.

Many people who take out different types of loans, such as credit cards and small loans, often end up with many invoices to pay every month. This is not financially beneficial. The reason is that most invoices come with an additional invoice fee on top of the original loan cost. If you have several loans to repay each month, you will end up paying a large amount that only goes toward invoice fees. The money spent on invoice fees and other costs related to managing multiple small loans should instead be used to pay down the actual debt. By doing so, you can save both time and money.

• Save time and money every month with refinancing

It will not only become very expensive to pay multiple invoices every month, but it will also take up a lot of valuable time. Nobody likes paying invoices. It is a time-consuming process that makes your bank account balance decrease. No matter how much you dislike paying invoices, it is something that simply has to be done. What many people do not consider is that they do not have to deal with many invoices every month. If they instead choose to refinance their loans, they will have fewer invoices each month. When you refinance multiple loans, you only need to pay a single invoice instead of many. Isn’t that a good solution?

With refinancing, you don’t have to dread paying off loans. It is done in a short time and in a clear and simple way.

The loans most people choose to refinance are very expensive loans, such as credit cards or small loans. These are loans that many people take out to purchase items that are not very costly, but which can have a noticeable impact on their finances if bought immediately. For example, many people use small loans and credit cards to finance purchases such as mobile phones and holidays.

• Refinance small loans and credit cards with a personal loan

Since these are not very expensive items, it is easy for many small purchases to add up. This is completely natural. Often, people simply continue paying all the invoices that arrive one after another. What they do not realize is that they can save both time and money by refinancing all small loans with a personal loan. A personal loan is the cheapest form of loan in this category, meaning a type of loan that does not require the borrower to provide collateral. If you have many purchases financed through small loans and credit cards, it can be a good alternative to refinancing with a personal loan What you do is take out a personal loan that is large enough to pay off all your existing debt, such as small loans and credit cards. This way, you eliminate all the small loans. The result is that you only have one loan to repay each month. It also means that, overall, you pay less in installments and fees each month.

How to apply for refinancing?

In essence, this is relatively simple. You apply for a loan large enough to pay off your other existing loans. It is therefore a good idea to get an overview of how much debt you have. Once you have this overview, you can apply for that amount in a new loan, stating that you intend to use the funds to refinance other debt.

If you communicate this to a potential lender, there is a higher likelihood that the application will be approved, especially if you can demonstrate to the lender how much of an impact refinancing will have on your personal finances. It is a fact that you can have lower monthly fixed expenses by only paying one single loan, but more on this later in the article.

Small loans can be consolidated

Small loans are typically loans with small borrowing amounts and relatively high effective interest rates. A classic example is having three or more different loans with different interest rates. This means you pay at least three times as much in fees and charges as is strictly necessary.

No one benefits from this, especially not if you already have a tight personal budget. If you apply for a new loan large enough to pay off your small loans, the result is that you only pay fees and charges once per month instead of several times. If you use a personal loan to refinance small loans, it is likely that the personal loan you take out will have a lower interest rate than the rates that apply to small loans.

Advantages of using a personal loan for refinancing:

• No collateral required
• The cheapest form of loan in its category
• Only one single, uncomplicated invoice to pay

Instead of having several expensive small loan and credit card invoices each month, you can use a personal loan for refinancing. This way, you will only have one invoice to pay. Personal loans are also the cheapest type of loan in this category.

A personal loan is a type of loan that is both easy to get approved for and easy to manage compared to other types of loans. In the category of loans without collateral , personal loans are often the cheapest option. Personal loans are well suited for refinancing, but only if you find a good personal loan. If you apply for a personal loan with poor terms, it can actually make your financial situation worse than it was before you applied for a loan you intend to use for refinancing. Therefore, it is important to be careful when reading the terms that come with a financial loan.

To apply for personal loan with Nanofinans is completely non-binding. Once you have filled out and submitted your application for a personal loan, 12 or more banks will receive it. These banks will then compete to get you as a customer. As a result, you will receive the best possible offer for your needs and situation. You can then simply accept or decline the offer. If you accept, the money will be in your account within a short time.

Some advantages of taking a loan through Nanofinans:

• Completely non-binding
• You choose the desired loan amount and repayment period yourself
• 12 or more banks will compete to get you as a borrower

How does refinancing work?

Many people understand what refinancing is. You hear or read about it from time to time. However, not many people know how refinancing actually works. It is not uncommon to end up with a stack of invoices every month if you have multiple creditors. Many of these invoices often come from small purchases made using credit cards or small loans.

When you have many invoices from different small loans and credit cards each month, it is not only difficult to keep track of everything. It also becomes more expensive the more invoices you have. We have previously mentioned that almost every invoice comes with a billing fee, at least when it comes to paper invoices. Many invoices will therefore usually cost unnecessary money. This is where refinancing comes in. Refinancing works by taking out a personal loan that is large enough to pay off all the smaller loans. What you are left with is only one invoice to think about – and pay each month. As a result, you have more money left over that you can use as you wish. That is always a good thing. It is always more enjoyable to spend money on something you want instead of paying unpleasant bills.

Refinancing of personal loans

It is also possible to refinance personal loans if you have large amounts of consumer debt. As with almost all refinancing, the goal is to reduce the fixed expenses associated with repaying an amount you have taken out as a loan. 

If you want to refinance a personal loan, the easiest option can be to “roll” a personal loan into a loan where you can provide collateral. In most cases, this means a mortgage.

The procedure for such refinancing is similar to the one described above in connection with consolidating small loans. The main difference between these two methods is that you take out a larger sum in the form of a mortgage instead of taking out a new personal loan. 

This means you will pay more on your mortgage, but the major advantage of this type of refinancing is that mortgages usually have a much lower interest rate compared to the effective interest rate commonly found on personal loans.

What can you refinance?

After reading about all the benefits of refinancing, the next natural question is: what can you refinance? Technically, you can refinance almost anything, but that does not mean it is wise to refinance all types of loans.

• You should not refinance expensive purchases such as mortgages, cabin loans and car loan.

In most cases, it will not be beneficial in any way to refinance very expensive purchases. Examples of such purchases include property, cabins, and cars. It will simply become more expensive if you use a personal loan to refinance such purchases.

This is mainly due to the relatively high interest costs associated with a personal loan compared to the interest costs linked to, for example, a mortgage. The purchases may even be too large for it to be possible to use a personal loan for refinancing. There is usually an upper limit for this, which is typically around NOK 800,000. This is something to keep in mind when refinancing loans.

How can you refinance a mortgage?

Even though it is not recommended, there is a method that can be used if you want to refinance a mortgage. This example is based on the regulations regarding the requirement that a person who wants to buy a home must be able to provide equity amounting to at least 15% of the property value. This means that you can take out a maximum loan amount corresponding to 85% of the value of your home.

If you wish to refinance a mortgage, at least one of two criteria must be met. Ideally, both criteria should be met in order for it to be possible to refinance a mortgage.

The first criterion is that there must have been a real increase in the property’s value. In simpler terms, this means that the home must be worth more than the amount originally paid when it was purchased. If you want to find out whether your property has increased in value, you can contact a real estate agent. It is advisable to contact an agent with local knowledge of the area where the property is located, so that the valuation is as accurate as possible.

If that is the case and the value of the property has increased, it essentially means that you have not used the full borrowing capacity of your home. If the property value has increased, it may be that the loan you originally took out only corresponds to, for example, 77% of the home’s value. In such a case, you can apply for an additional loan secured against the property so that your total loan corresponds to 85% of the property’s total value. The extra loan amount secured against the home can then be used to pay off other loans and credit lines that typically have a higher interest rate than those associated with a mortgage.

The second criterion for refinancing a mortgage is simply that you have paid down a sufficiently large portion of the original loan amount you took out, so that you are able to borrow more against the property in the same way as described above.

What prevents such refinancing?

First and foremost, it is actually time that prevents refinancing a property in the ways described above. It is extremely rare for a property to increase in value so quickly that it is worthwhile to reappraise it just one or two years after it has been purchased. 

There have been cases where this has occurred, but those cases were caused by events and circumstances that are difficult to imagine happening again.

Therefore, the general rule of thumb is that a new valuation of the property should only be carried out after a minimum of 4 years. Some real estate agents will also recommend waiting even longer before conducting a new valuation of the property.

The same can be said when it comes to paying down a mortgage—it also takes time. So unless you are in a situation where you meet the criteria mentioned earlier regarding mortgages, you should not refinance it. It is also strongly recommended that if you refinance a property, you do so by securing the loan against the property and not by using a personal loan in such cases.

However, there are still types of loans that can and often should be refinanced with a personal loan.

• You should refinance small loans and credit card debt, mobile phones, travel, household appliances, and other small purchases.

There is therefore a lot that can, and in most cases will be wise to, refinance. Small purchases such as mobile phones, household appliances, travel, and other small expenses financed through small loans or credit cards are smart to refinance. This is mainly because these loans typically have relatively high interest rates compared to those you can get when applying for a personal loan.

When it comes to such small purchases, it will be clearly noticeable at the time if you spend between NOK 10,000 and 100,000 at once. If you use small loans or credit cards, the purchase experience is more comfortable when spending such amounts. With the help of small loans, you can instead pay an agreed monthly amount over a fixed number of months. Because of this, it is easy to end up with many purchases financed through small loans and credit cards. This is not necessarily a bad thing. In fact, it can be wise to finance purchases such as a mobile phone or travel with a loan. However, what many people do not think about is the fees that each invoice brings with it.

When you have multiple invoices each month, it does not need to be many, just a couple, refinancing can really be worthwhile. Refinancing will eliminate all the time and all the fees that come with multiple invoices. With refinancing you will only have one invoice to deal with, think about how good it feels not having to worry about whether you have forgotten to pay an invoice that has been hidden at the bottom of the pile of mail.

How much can I borrow for refinancing loans or debt?

Today it is possible to give a fairly concrete answer to this question. A debt register has been established in Norway. At the same time, legislation has been introduced that sets guidelines for this. 

The main principle of this register is that if a person has a total debt, meaning the sum of both secured and unsecured debt, that exceeds an amount equal to 5 times the person’s gross annual income, that person should not be granted additional loans. If the debt is below this level, it is still possible to be approved for more borrowing, as long as it does not exceed the limit of 5 times gross annual income.

If you are interested in learning more about the debt register and what you can do to get out of debt problems, it is recommended that you visit the debt register’s website. There you can find more information about what you can do to help yourself out of a difficult financial situation.

How do I avoid paying too much for the loan?

Interest rates and fees associated with a loan vary from one lender to another, and you may end up in a situation where you pay more for your refinancing loan than you should. You can avoid paying too much for your loan by comparing interest rates and fees across lenders. Then choose the provider that offers the cheapest loan for your specific situation.

This option is offered by Nanofinans to our users, so that you can quickly, easily, and completely free of charge get a good overview of the market. By quickly comparing lenders in the market, you can find the cheapest loan for refinancing mortgages, refinancing small loans, and similar products. Feel free to contact our customer service if you have any questions. We are here to help you.

What can I save money on?

A significant savings potential lies in the monthly fee that most lenders charge. If, for example, you have five loans, you pay this fee five times per month. If you choose to refinance your debt with a loan at an attractive interest rate, you reduce these costs and thereby save a significant amount each month.

The monthly fee is therefore paid in addition to your monthly or annual interest. The same applies to setup and registration fees. Financial professionals often refer to this as the annual percentage rate. It is also often shortened to the APR value of a loan. It is a good idea to take a look at this when evaluating different loan offers.

What can I check myself to save money?

Fortunately, there is a simple thing you can do yourself to save money on a loan you take out. What you can do is check what effective interest rate the loan offers you are considering have. For those who do not know the difference between nominal and effective interest rate, the explanation is as follows:

Nominal interest rate The nominal interest rate is the interest rate stated in the offer. If it says that you can be approved for a loan amount at 10%, the nominal interest rate for that specific offer is 10%.

This makes it easy for a potential borrower to evaluate offers based on the nominal interest rate. However, doing so can lead you to accept a worse offer than necessary. The interest rate you should look at when comparing offers is the effective interest rate.

Effective interest rate: The effective interest rate is the nominal interest rate plus all costs and fees associated with the loan. If you look again at the example above, the effective interest rate would be around 12% because it takes into account all costs related to the loan amount you want to borrow.

Fees and costs: These are costs related to the administration of a loan. This means the cost of sending you a paper invoice each month. This cost is called a term fee. In addition to the term fee, there may be other administrative costs such as an establishment fee.

Establishment fee: This is a cost that is paid once when the loan is established. The amount is intended to cover the cost required to set up the loan. This amount is usually added to the first installment paid to the lender.

It is usually not a very large amount in fees and costs, but if you assume that this amount is paid at every installment for as long as you are repaying the loan, it quickly becomes a significant sum that must be paid in addition to the interest.

Based on this, it is advisable for a potential borrower to compare the effective interest rate on the loan offers being considered. The loan with the lowest effective interest rate will cost the borrower less than a loan with a higher effective interest rate.

With many lenders offering personal loans, you can apply completely non-bindingly, which means you do not have to take out a loan even if you have received an offer. With Nanofinans comparison of personal loan for refinancing, you can quickly and easily get a good overview of the options available on the market. Here is an example of what a loan offer can look like.

Where can I find the best way to refinance my loans?

When you have an overview of how much you want to borrow and the repayment period you need for the loan, you can compare all loans via our comparison portal at nanofinans.no. By using it, you can compare the prices of all loans in Norway. This way, you can secure the best possible loan terms available. That can in turn save you a significant amount of money.

How do I find the cost of a loan?

The annual percentage rate is the best way to find the total cost of your loan. It is abbreviated as APR. The APR must be indicated by all banks and financial companies that offer loans. It is a requirement that they provide APR information so that it is easier for consumers to compare loans in Norway. The higher this value is, the higher the total cost associated with the loan will be. This is often referred to as the price of a loan. Look carefully at this value when evaluating different offers from different banks and financial institutions. It can save you a lot of trouble later on.

Refinancing – Save time and money

More and more people want to refinance expensive debt. Refinancing multiple loans with one lender comes with several advantages. With refinancing, you can save both a lot of time and a lot of money each month.

Many people receive a stack of invoices from small loans and different credit cards that need to be repaid each month. This is never a very pleasant experience. First of all, it takes a lot of time and energy to pay each of these invoices. Secondly, it is difficult to keep track of everything. Thirdly, most invoices today, especially paper invoices, come with a billing fee. This makes it much more expensive to pay multiple invoices than to pay just a single one.

With refinancing, you can also get both a longer repayment period and a lower monthly payment. As mentioned, refinancing comes with many great benefits. Some of these are:

• Better overview, only one invoice to think about
• Only one invoice fee to pay
• Save a lot of time each month
• Less to pay per month
• Longer repayment period

In many cases, it will be beneficial to use refinancing, but as with all other loans, it is important to plan. If you take out a loan with little or no planning, you will in most cases end up worse off and may lose a lot of money. You should always get an overview of how much you need, how much you can pay per month, and a general plan for how you will use the money. You can calculate this yourself or seek professional help if you find it difficult to figure it out on your own.

Regardless of whether you choose to do it yourself or get help, refinancing will work well—as long as it is done correctly. Refinancing allows you to pay a smaller amount each month. You will receive fewer invoices in your bank or by post, and it also gives you a much better overview of your personal finances. This is always a good thing, regardless of whether you have a tight or comfortable personal economy.

 Is refinancing only for those in financial distress?

The short answer to this question is “no”. It can be easy to think that only those in financial distress need refinancing, or that refinancing is a sign of financial weakness. Neither of these statements is true. In fact, the opposite is the case. Refinancing is for those who are financially smart and value both their time and their finances. At the same time, refinancing is an effective tool for those who find themselves in an unfortunate financial situation, which can happen to anyone from time to time, no matter how careful they are with their money. When you end up in financial difficulty, refinancing can be a realistic way out.

Refinancing of credit card debt

Credit cards are a good tool in everyday life, but they are not at all suitable for accumulating debt. This is an important rule of thumb if you are considering getting a credit card.

Credit cards are a form of borrowing that is best suited for short-term credit. When you use a credit card, interest does not start accruing until the regular monthly due date. Depending on the date of purchase, this can be up to 45 days. This means interest-free credit until then. You will hardly find better terms elsewhere. It can be a good solution if you receive an unexpected bill and know that you are able to repay the amount when you receive your next salary. In that case, you can even repay the amount without paying any interest on it.

Remember that if you do not take the opportunity to pay off everything you have spent on the card before the interest-free period ends, the meter starts running. And it starts running quickly. It runs faster than taxi meters around the world. Most standard credit cards come with very high interest rates, much higher than most personal loans. Therefore, it is not profitable to use credit cards for absolutely all purposes. Credit cards should be an additional tool in your personal finances. They are not suitable as a primary solution if you suddenly run into financial problems.

When you use more than one credit card

Most of us today have more than one credit card that we use for different purposes. An inattentive user who does not keep track of how the balances on different cards develop risks reaching the credit limit on several cards. If a particular card has a credit limit of 100,000 kroner, you will not receive clear warnings from the card issuer before you approach the credit limit. This can be a recipe for disaster if you do not monitor how much you are spending.

The worst thing you as a borrower can do if this happens is to start servicing this credit card debt with another credit card. The new card will then eventually also approach its credit limit. This will only make your financial situation worse than it was to begin with. As we can see, this is a vicious cycle that can end in the worst possible way: first debt collection, then enforcement proceedings, and finally forced sale. If that happens, you risk losing everything. This is something you should do your utmost to avoid.

Refinance if you have credit card debt

The rule is that you should pay off your credit card debt every month. If you have not managed to follow that rule and have debt on one or more cards, you should try to refinance it. By replacing the accumulated credit card debt with a consolidated refinancing loan, you get:

• Lower interest rate
• A repayment plan
• And in most cases, lower monthly repayment costs.

After refinancing, it is of course important not to end up in the same situation again. For many, a solution is to cut up all cards except one. This is especially relevant for those who know they have poor impulse control.

Best refinancing of small loans

Small loans are another type of credit that can cover an immediate need for a limited amount. It can be used to finance a new refrigerator because the old one has broken down, or to pay for an urgent car repair. A small loan can be used for almost anything, as long as the amount involved is not too large.

Small loans they usually come with a high effective interest rate and are therefore designed to be repaid relatively quickly. If you need a bit more time to repay it, meaning longer than one month, it can be the best solution. With a credit card, as mentioned above, you typically have a period of about one month before interest starts accruing.

If you have several such small loans, however, it quickly becomes impractical and difficult to manage. Each loan incurs a relatively high interest rate as well as fees for each individual loan. Together, this can result in significant monthly payments, especially if you also have credit card debt. By using a refinancing loan to consolidate all of these, you will not only achieve a lower interest rate. You will also have significantly less to pay each month. It becomes even lower if you take a loan with a longer repayment period than was the case with the small loans.

Help with refinancing

When applying for refinancing, you need to have a good overview of the debt you are responsible for. If things have been financially difficult recently, you may have lost a bit of control. In that case, you should get things in order. A general good tip is to make a list of all your creditors and how much you owe each one, as well as the interest rate on each loan. This can make it easier for you to keep track.

You may have debt that is suitable for refinancing, and other debt items that already have sufficiently good terms today. The latter include: mortgages and student loans. These two types of loans are generally not suitable for refinancing. Among the first category are especially the previously mentioned small loans and credit card debt. Standard personal loans can also be included in debt refinancing. If you have unpaid rent and bills that are about to be sent to debt collection, these can also be included.

A possible tax claim from the tax collector is in a middle position. With the standard late payment interest rate, the rate is often lower than that of a refinancing loan. On the other hand, the tax authority has a range of enforcement measures at its disposal, such as direct wage deductions or forced sale of property. Therefore, it may still be financially beneficial to include the tax claim in the refinancing.

 Find out how much you owe

Once you have reached the point where you have made a list of the claims and debts to be included in the refinancing, it is time to obtain information about the exact amount to be settled. This is the next step after you have gained an overview of your situation. Since interest accrues daily, a date must be chosen on which all payments are to be made. The balance must then be stated for that specific date. However, this is something the bank helping you refinance will often do for you.

If, after refinancing credit card debt and small loans, you do not want to end up in a similar situation, there are ways to “restrict” yourself financially. For example, you can cut up and return your credit cards and at the same time inform the company that you no longer wish to receive offers for additional credit. You can also “self-blacklist” by sending a letter with your request to credit reporting agencies. Your wish not to receive further loan offers will then appear in the credit assessments requested by banks. In this way, you can ensure that your access to credit is effectively blocked. You can withdraw this “self-blacklisting” whenever you choose, if it becomes relevant.

Loans with collateral

On this page, we have mainly assumed that you cannot provide collateral for the refinancing. This means that as a borrower you will take out a so-called “unsecured” loan, such as a personal loan. If you own your own home or have family members who can use their property as security so that you can obtain cheaper refinancing of loans, you can achieve much better terms.

A potential borrower’s strong repayment ability is often explained as follows: in simple terms, you must convince the bank you are borrowing from that you are able to repay any loan within the agreed time and under the agreed terms. There are three things you as a borrower can do to present yourself in the best possible way. These three are:

1. Have a stable income. This makes it easier for the bank to set up a realistic repayment plan for a potential loan.

1. Pay your bills and avoid having payment defaults. When you pay your bills on time, it shows the bank that you have control over your personal finances. This can help reassure the bank that you will also pay installments and fees related to the loan on time. In short, banks will be relatively confident that they will get back the money they have lent to you.
2. Have a monthly savings amount. This is linked to number 2. Banks will see that you have control over your personal finances. A monthly savings amount demonstrates this. In addition, having a buffer for unexpected expenses will help protect you from needing to take out additional credit if something happens. How well a borrower can handle a potential interest rate increase is also something banks consider. If you have a savings buffer, it is likely that your personal finances can withstand a possible interest rate increase.

When you can answer “yes” to these three points, the banks will conclude that you as a borrower have a good repayment capacity.

If you are considered to have repayment capacity, there are many places where it is possible to borrow an amount up to 85% of the value of the home. Although the general rule of thumb for this amount is usually 60% of the home’s value, it can be registered as a second charge after the mortgage. Sometimes it is also possible to combine it with the mortgage itself.

Registering collateral security requires a bit more work. You need to obtain a valuation of the property, or alternatively a new valuation from a real estate agent, before applying for a refinancing loan. After that, the security must be registered and recorded. Despite the extra work, it results in the cheapest possible refinancing of loans.

Cheap refinancing

After learning about all the great benefits of refinancing, it is time to find out how to get the best refinancing for your own needs. Not every lender offering refinancing will give you the best terms—in fact, quite the opposite. If you ask a bank directly to use a personal loan for refinancing, it is not certain that they will offer you the best rates and conditions. They assume they are the only option you are considering. Therefore, it can be beneficial to submit a loan application to several potential lenders.

Without competition, you will not get low prices and good terms—that is simply how it is. There is a reason why we have what is called the Competition Authority. Without competition, all prices would be much higher than they are today. Providing a good customer experience would not be important. That is why we send all loan applications to 12 or more banks.

Everyone who submits a completely non-binding application through Nanofinans for a personal loan for refinancing will have 12 or more banks competing to offer the best interest rates and terms. You can then simply accept or decline the offers depending on how they suit you and your financial needs. It pays to explore all available options before signing a loan agreement.