Fortunately, you can refinance almost all types of debt, from mortgages to car loans, student loans, credit cards, and more.
Here, we are sharing what you need to know if you want to refinance your debt.
Refinancing a mortgage
Refinancing your mortgage is an option to reduce your monthly payment, particularly when interest rates are low.
Recently, it has become easier for homeowners to refinance a mortgage through a traditional lender. For instance, some credit unions offer 30-year fixed mortgages for retirees with fixed incomes. Other large companies like Fannie Mae will let homeowners use a portion of their retirement savings as income when calculating their qualifications.
Refinancing student loans
If you are among the thousands of graduates still carrying the burden of student loans, you are in luck: Public and private lenders alike offer various refinancing options with interest rates as low as two percent. If you’ve consistently made timely payments, you are more likely to score a favorable interest rate.
If you refinance a federal PLUS loan, keep in mind that you may forfeit the opportunity to select an income-driven repayment plan. As such, before pursuing a refinance option, make sure you have a consistent, reliable income to continue making your fixed payments.
Refinancing a car loan
For borrowers with strong credit, refinancing options apply to car loans as well. Banks and credit unions offer refinancing options with interest rates as low as 2.24 percent. You can locate a credit union near you by searching aSmarterChoice.org.
Refinancing credit card debt
If you are juggling high-interest credit card payments, consider a 0% balance transfer offer. In order to qualify, you will need to have strong credit. However, there are some situations in which you can qualify even if you have a low credit score. Most credit card applications require borrowers to declare their income, which may include income from a retirement or investment account.
To shop around for the best deals, check out sites like NerdWallet and MagnifyMoney.
Refinance only when it makes financial sense
Although there are many ways to refinance your various loans, refinancing is not for everyone. There are often costs associated with refinancing – like closing costs for a mortgage refinance – and as such, you will need to carefully weigh whether your long-term savings outweigh upfront expenses. Additionally, refinancing to pay down your debts sooner likely means you will face higher monthly payments, so make sure you are equipped to tackle them before you take the plunge.
