Can you renegotiate the loan terms if your credit improves?

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June 26, 2018

Maybe you ran into a financial problem and had to take out a personal loan. You are responsible for the money, so you have made minimum payments on time. But it has been a long time since you took out this loan and your credit score has improved. Can you renegotiate your personal loan for better terms?

If you’re looking to lower your payments, see how you can revise your loan terms to pay less.

1. Check your credit report

Although your credit score may appear to be in good shape, check your credit report to see if there are any red flags. You can do this through AnnualCreditReport.com or potentially through your bank.

Building a strong credit report does not happen overnight. If you are building credit from scratch, it can take three to six months to show a solid history. If you’ve recently paid off debt, you might have to wait longer. Accounts that were in collection are on your credit report for seven years.

2. Review the terms of your loan

Depending on the type of loan you have and the lender you are using, you might have several different choices.

You could renegotiate your current loan to get a better interest rate, but you could end up with a longer term. In this case, you might not save that much money.

Refinancing your current loan could also be an option. This is where you take out a new loan to replace the one you have. If the terms of your current loan are on hold and you can’t renegotiate, consider refinancing.

3. Browse other offers

It’s always a good idea to check out the competition. Do your research by browsing through personal loan offers. By buying from lenders, you will be able to see how much your monthly payments might be based on your credit score.

If you can’t renegotiate, you can take out another personal loan to prepay your current one. If you don’t face a prepayment penalty, you should have no problem doing so. But make sure that you are financially prepared for this option. And double check the payment charges before you go ahead.

4. Talk to your lender

If you’ve looked at your credit report, reviewed your current loan terms, and even checked out competing personal loans, it’s time to speak to your loan officer. Your preparation will be helpful in discussing your options.

If your loan is from a bank or credit union, you can probably make arrangements to meet with someone at your local branch. Having face to face contact can be helpful in your renegotiation.

Explain honestly why you are looking to lower your interest rate. You might argue that you deserve a better deal, for example, because your credit score is up and you’ve made regular payments on time.

Many lenders will work with you. So have a target goal in mind. For example, maybe your current APR is 21.00% and you would like to reduce it to 16.00%. Maybe your score shows it could be as low as 11.00%. Whatever the number, know what rate you want before you talk to your lender.

5. Have a backup plan

Since there is no guarantee that your lender will reduce your APR, you will need to have a few other options in case Plan A does not work. Here are a few to consider:

  • Try refinancing: If you can’t lower your interest rate, refinancing your loan might work. See if your current lender will do this, or if you need to find a new one to refinance your personal loan.

  • Discover the different types of assistance: If you are having financial difficulties, you may be eligible for help. For example, SoFi will temporarily suspend payments and help you find a new job. Talk to your lender about options for your financial situation.

  • Pay it sooner: With no prepayment penalty, you’re in a good position to pay off your loan before the due date. This will allow you to pocket money that would otherwise have been used as interest.

Good credit doesn’t always mean good terms

While more manageable terms look great, you may not be able to renegotiate your loan terms even as your credit improves. It is good to be prepared before speaking to your loan manager. Do your research on lenders who have better terms. Whatever the outcome, you’ll be ready to take out a loan the next time you need it.

Interested in a personal loan?

LendingTree allows you to compare the rates of several lenders by filling out a simple form. How is the student loan hero paid

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Student Loan Hero is indemnified by the companies present on this site and this compensation may have an impact on how and where the offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the market.

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Student Loan Hero is an ad-supported comparison service. The site presents products from our partners as well as institutions that are not advertising partners. While we endeavor to include the best offers available to the general public, we do not guarantee that this information represents all products available.

How is the student loan hero paid

How is the student loan hero paid

Student Loan Hero is indemnified by the companies present on this site and this compensation may have an impact on how and where the offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the market.

Advertiser Disclosure

Hero Student Loan Advertiser Disclosure

Student Loan Hero is an ad-supported comparison service. The site presents products from our partners as well as institutions that are not advertising partners. While we endeavor to include the best offers available to the general public, we do not guarantee that this information represents all products available.

PRICES (APR) Amount of the loan
5.99% – 18.85%1 $5,000 To $100,000
4.37% – 35.99% $1000 To $50,000
5.94% – 35.97%* $1000 To $50,000
99.00% – 199.00%2 $500 To $4000
5.99% – 24.99%3 $5,000 To $40,000
7.99% – 29.99%4 $7,500 To $40,000

NMLS # 1136: general conditions apply

1 Includes AutoPay discount. .
2 Includes AutoPay discount. .
3 Includes AutoPay discount. .
4 .
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