This world is changing every second. No one can predict what will happen. As regards to our life, small changes happen every day. Maybe one day you wake up and find out that the interest rate of you loan is too expensive or risky to continue to make payments on. What can you do?

Your first option: Refinance.

What is a refinance

Most commonly, when the interest rate environment changes, debtors can choose to sign a new loan with different terms to pay off the previous one. By doing so, debtors can save a lot of money due to the change of interest rate.

How refinancing works

The key of refinancing is to pay less. The refinancing process includes the reevaluation of the debtor’s credit status. Consumer loans for refinancing often include mortgage loans, car loans and student loans.

Types of refinancing

There are many types of refinancing options.

  • Rate-and-Term Refinancing

This is the most common type. Many debtors will require a lower interest rate; thus, they will turn to rate-and-term refinancing.

  • Cash-Out Refinancing

Let’s say if you have a house that increases in value on paper, you can get cash by refinancing rather than by selling it.

  • Cash-In Refinancing

The cash-in refinancing allows you to pay down some part of the loan for a smaller loan payment.

  • Consolidation Refinancing

If you have several loans, you can apply for a new loan that consolidate all the loans together with a rate which is lower than the current average interest rate across several credit products.

2 thoughts on “What does it mean to refinance a loan?”

  1. I recently retired almost a year ago and live on a $3200 monthly income., my mortgage interest rate is 4.5 which is way high compared to what it is now. I’ve tried getting new mortgage and refinance for lower interest rate but keep getting rejected due that I’m retired and not have enough income. I’ve never missed my payments of $2225. Now I’m stuck with this high rate and it’s getting difficult for me to handle, all I want is a lower rate and maybe pay $1800 monthly. Please help and advise if there’s out there a mortgage company that would be able to assist me? Urgent help needed ASAP!

    Thank you,
    LD

    8/7/2020

  2. I recently retired almost a year ago and live on a $3200 monthly income., my mortgage interest rate is 4.5 which is way high compared to what it is now. I’ve tried getting new mortgage and refinance for lower interest rate but keep getting rejected due that I’m retired and not have enough income. I’ve never missed my payments of $2225. Now I’m stuck with this high rate and it’s getting difficult for me to handle, all I want is a lower rate and maybe pay $1800 monthly. Please help and advise if there’s out there a mortgage company that would be able to assist me? Urgent help needed ASAP!

    Thank you,
    LD

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