When it comes to debt management, there are so many different options that it is easy to get overwhelmed. From debt settlement to credit counseling, loan consolidation and balance transfers, it’s often hard to decide the right way to tackle debt.
However, before resorting to drastic measures like bankruptcy or debt settlement, there is one popular debt management strategy you should consider — refinancing.
Even though most people think of home loans when they hear “refinancing,” there are actually several types of loans that can be refinanced. Read on to learn a bit about these loans and how refinancing may help.
What Does It Mean to Refinance a Loan?
When you refinance a mortgage loan or any other type of loan, you are essentially changing the terms of the loan. Unlike debt consolidation, which does not save you money in the long run, loan refinancing often allows you to lower your interest rate on a loan.
If you do it successfully, refinancing a loan means replacing an existing loan with an entirely new loan that has a lower interest level. This will let you pay off the principal on your existing loan, and since the new loan will have a lower rate, your interest will not accrue as heavily as with the previous loan.
Ultimately, refinancing will help you save money in the long run, and the best part is that you can do it with several different types of loans.
Learn About Auto Refinance
A car is one of the larger purchases we make, aside from our homes. With this in mind, it can sometimes make sense to consider a car loan refinance, especially if you can find a deal that offers excellent auto refinance rates.
It is important that when searching for this type of loan, you take a look at how the interest may increase over the duration of the loan as well as the current auto loan refinance rates. This is because even though you may be offered a low rate initially, this could rise in the future leaving you in a worse position.
Refinancing your car loan may also lower your monthly payments, which is another reason why this option attracts so many drivers. But if you struggle with bad credit, it can be harder to obtain a loan. A car refinance loan for bad credit can be found with companies such as Open Road.
If your credit rating is slightly better, however, the Chase auto refinance loan could be a good option. With a relatively low APR and higher loan values, this one may be ideal if you owe a larger amount.
Learn About Student Loan Refinance
A student loan can loom over your head long after your graduation, but refinancing can bring about multiple benefits. Refinancing a private student loan or a federal one can be done easily and may help to lower your student loan interest rates as well as bringing down the monthly repayments.
According to Forbes, refinancing your student loan can also save you an incredible amount of money — in some cases up to $30,000, meaning that you are able to spend this in other areas of your life or better yet, keep a portion in a high-yield savings account and invest another portion in low-risk stocks.
One of the major catches with this type of refinancing is that you need to have a credit score that is greater than 600. However, the refinancing loan may not cost you anything.
Some of the best student loan refinance options come with some great benefits, such as releasing a co-signer and giving you a fixed-rate interest that rarely goes higher than 5%. One example is the SoFi student loan refinance, which offers a free refinance that can all be completed online as well as access to career coaching and other useful resources.
Learn About Credit Card Refinance
One of the most common types of loans to refinance is a credit card, often referred to as a credit card balance transfer, since many people opt to clear one credit card with high interest by moving their balance to a card with a much lower interest rate.
What is more, credit card refinance can also allow you to reap additional benefits from the new card, such as signup incentives, cashback on further purchases.
It is important to carefully consider your options when taking advantage of a balance transfer. Many credit card providers offer a no-balance transfer fees and 0% interest, but this rate may only apply for a set period of time, such as 12 to 18 months. Therefore, it’s important to make sure you can pay off your transferred balance within that time frame.
If you have more than one account, credit card consolidation is another option. You can take out a personal loan to pay off the credit cards and then make one smaller monthly repayment to the lender, or you may opt to take out another credit card with a larger limit to pay off all of your existing cards.
One of the most popular services for doing this is the Capital One balance transfer, which offers a generous 24-month 0% period on top of fast approval.
Learn About Mortgage Refinance
Before agreeing to refinance a mortgage, it is essential that you do a current mortgage rates calculation, which can be done online with no hassle. If you are not able to get a better rate of interest than the one you currently have, then refinancing may not be wise.
Accessing good home refinance rates is one of the main reasons that people remortgage their homes. However, many people may also choose to do this as a way of lowering their monthly payments. Additionally, a mortgage refinance may work for you if you wish to shorten the term of the loan or change from one type of mortgage to another.
If you need a cash injection for home improvements, retirement funds, a holiday or anything else, a cash-out refinance may be the right choice. The loan value will be higher than your current mortgage and you are then able to withdraw the difference in cash. However, as always, it is important to check the mortgage refinance rates to ensure you will be charged more than you can comfortably afford.