What is refinancing: refinancing means refinancing
Refinancing is the process of modifying and changing the terms of an existing credit agreement, usually related to a loan or mortgage. When a company or an individual decides to refinance a loan, it seeks to make favorable changes to its interest rate, payment schedule, and / or other terms specified in its agreement. If approved, the borrower receives a new contract that replaces the original contract. When the interest-rate environment changes significantly, borrowers prefer to refinance, which leads to potential savings in loan repayment from the new agreement.
Refinance occurs when existing loan terms, such as interest rates, payments or other terms are modified.
Borrowers tend to refinance when interest rates fall.
Refinancing involves a person’s debt and repayment status.
Consumer loans considered for refinancing include mortgage loans, car loans and student loans.
How does refinance work?
Consumers often want to refinance some loan obligations in order to obtain more favorable loan terms in response to changing financial conditions. The general objectives of refinancing are to change the term of the loan to reduce the payments over the life of the loan, to reduce the fixed interest rate, or to change the fixed-rate collateral to an adjustable collateral, or vice versa. Borrowers can also refinance because a change in their long-term financial goals has changed their credit profile or they want to consolidate to repay their existing debt and convert it into a low-cost loan. The most common motivation for refinancing is the interest rate environment. Since interest rates are cyclical, many consumers prefer to refinance when rates fall.
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