Refinancings

[austin3515]

If someone wants to refinance for the max proceeds available, then generally they do not get a new5 year term. Btut there is an exception whereas the OLD loan balance can be repaid down to zero in the original 5 year term, and the new loan proceeds can be amortized over a full 5 year term. The number one complication here is that the payments need to DECREASE after the original balance is paid off.

Is any actually doing this? Or is this just being ignored?

[12AX7]

Our recordkeeper vendors cannot handle the option you're describing. If I were tracking loans manually, then I would perhaps consider other options. For the most part, participants are happy with any additional amounts we can get them, even if that means amortizing the replacement loan within the replaced loan's term.

[austin3515]

We've never broached the topic in the past with anyone; and I hadn't even considered the RK limitations. I was more focused on the inability of our clients to stop withholdings when the loan is done, let alone reduce the loan payment in 2 years!

Glad to hear I am not alone...

[K2retire]

We are very much a no frills, few options shop. Our loan policies are all written to only allow 1 loan at a time and not permit refinancing. The hassle is not worth it when there is so much chance for error on the part of the employer doing the payment withholding.

[Jim Chad]

Hi Austin

Yes I have done this and because of the few loans I have, it has not been too much of a problem. So far I have just put a note in my Franklin planner for when the payment can reduce. When the time came I was lucky enough that payments were made as expected. And it wasn't too bad to send a note to payroll.