With consumer debt in America over $4 trillion dollars, it’s safe to say that you’re familiar with the concept of financing purchases. At the very least, most people have credit card debt, automobile loans or home mortgages, if not all three. What many people don’t realize is that financing isn’t locked in stone when you sign the papers until your debt is paid off.
Almost anything that you have purchased with financing can be refinanced at some point before the end of the financing term, and often it can save you time or money.
The top three reasons to refinance anything you’ve purchased with a loan are all extremely good reasons to consider refinancing.
- You could shorten your loan. Depending on what type of financing you acquired, you may have the ability to refinance your existing loan for a shorter length of time without increasing your monthly payments. If you have three years left on a five year loan, but your credit score has improved or interest rates have dropped during that two years, refinancing could turn that three years of payments into two years or less.
- You could lower your payments. Another option that you might be eligible for, depending on your loan, is to keep the remaining number of payments the same while lowering the size of those payments. This can be driven by many of the same factors that come into play when shortening your financing, including positive changes to your credit or interest rate reductions. This situation would free up room in your monthly budget that could be used for other things.
- You could upgrade. Many times, the thing you originally financed becomes outdated. From electronics to cars to homes, the lifespan of items can oftentimes be less than the length of your loan. Again, depending on the terms of your loan, you can sometimes roll your remaining balance over to a new loan that gives you the opportunity to purchase updated items, or even to help refurbish or repair what you financed.
How beneficial refinancing your loan would be for you can be affected by several different things, but the research you should do is to discover if the loan you would like to refinance actually can be refinanced.
Home mortgages are popular choices for refinancing, as are some auto loans. The good news is that asking your loan provider if you can refinance is free.