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.