Your A-Z Guide On All The Ways To Refinance Your Debt


Refinancing is a financial term that means you are trading one debt for clearing another. If you can refinance your mortgage, you are trading the original mortgage for a brand new one.

So, where’s the benefit in this? This is done only when you can find a mortgage that offers better terms and an opportunity to save more money. 

It is like exchanging one debt for another. You can even trade your credit card debt for getting certain loans that include home equity loans. Or you can transfer your car loan to a new lender in order to get a better rate of interest.

The major objective of refinancing any debt is to save money over its tenure and to get hold of better terms & conditions. That includes lower interest rates, more time to pay it off, etc. 

If you are confused about how to make it possible, then don’t worry because we have got you covered. In today’s blog, you will know about the different ways in which you can refinance any financial debt and its benefits.

Benefits of Refinancing Your Debt

Before we check out the ways in which you can refinance your debts, here are some quick benefits that you can enjoy by doing so –

 Better Mortgage Rates

One of the most common reasons for refinancing debt is to get better mortgage rates. Lower mortgage rates help you to save a lot of money over time.

Reduced Monthly Payments 

With a lower interest rate, you will have to pay lesser monthly payments. As you can reduce your monthly payments, you can use this money elsewhere.

Reduce Your Term 

Refinancing your debt can reduce the term you have to pay your money to the lender. Reduced repayment term is often the best way to improve credit score.

Better Cash Flow 

All of the above points contribute to better cash flow. This will help you use this money in different aspects of your life.

Different Ways To Refinance Your Debt

For those who are refinancing their debts for the first time, it can be a bit tricky. But you should not worry as there are different ways in which you can do so without much hassle.

Straight Refinancing 

Straight refinance is a kind of loan that can be used to refinance an already existing loan if there is no extra cash. These refinance loans are usually for 15-year or 30-year loans and come with fixed or adjustable rates of interest depending on the lender.

The overall process is really simple and quicker than other methods. It allows a person to get a lower mortgage interest rate or maybe a shorter repayment term.

But keeping the existing balance as it was. Straight refinancing also has some other extra benefits as well.

First & foremost, it helps in debt consolidation. Using the principal money from the refinance, you can pay off the high-interest debt and save thousands of pounds every year.

It also helps you to enjoy a better credit score. When you pay the mortgage straight up, it improves your credit score since it reduces the credit ratio. 

This will be beneficial when you are getting certain loans that ask for a higher credit score. Individuals can enjoy tax deductions from straight-up refinancing methods.

Credit Card Refinancing 

One of the common ways to refinance is with the help of your credit card. The best way to do it is by balance transfer.

You can transfer the balance of one credit card to a different credit card that has lower interest rates and terms. You can opt for a zero-interest credit card for convenience. 

It should be noted that some credit cards with balance transfer facilities come with transaction fees. This is true even if the card is a zero-interest credit card. To avoid this fee, you can find out if any bank is willing to offer you a no-fee balance transfer credit card.

If you have a great offer on a credit card that comes with lower interest rates, and also there is enough credit to transfer, then you can opt for it. Pay off the high-interest debt with the help of this low-interest card, and that will surely save you a lot more money. To get the best benefits, you will have to do the maths.

Debt Consolidation 

Debt consolidation comes to play when you fail to make even the small payments on your previous loans. The option allows you to consolidate all the other loans into a single monthly payment.

You will get a big sum to pay off all the other debts. The advantage you get here is that it will help you to lower all the monthly payments. This way, you can even bring down the total interest rate. 

We believe that your home equity is one of the best ways to consolidate your debt. You should look out for any underlying terms that can increase the overall interest, or extend the repayment time by years or charge extra fees that can severely increase the debt load.

Debt consolidation is a lot beneficial if you are consolidating a student loan debt. For instance, if you have taken a major student loan years back, your minimum payments are high. 

And it can be a great pain to pay them out every month of the year. To get some relief, you can effectively consolidate the loans into one single loan from a single lender. On top of that, you can even decrease the monthly pay off and get better repayment plans as well.

The Bottom Line

So, here are the different ways in which you can refinance your debt and secure your finances more smartly. Refinancing is a great way to clear the debt, reduce mortgage rates, increase your savings and be financially smart.

If you want to know more about how you can get loans at lower interest rates first, improve your credit score and learn how to check your full credit report right now. Only after that opt for debt refinancing. So thorough research for your financing options as well.

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