What Is Refinancing?
Refinancing is the process of replacing an existing credit or loan agreement with a new contract, which may include better rates, a longer repayment period, additional funds, more affordable payments or other favorable terms. When you refinance or amend a loan, it’s important to follow the new loan terms in order to protect your credit health. Borrowers may refinance home mortgages, but other types of loans may also be eligible for refinancing, depending on the lender or credit agreement.
In some cases, borrowers may refinance a loan upon approval with their existing creditor. Other refinancing agreements involve replacing a loan contract with one from a different lender and paying off the initial loan. While refinancing is more commonly associated with longer-term loan contracts, including mortgages, it may be available for other types of loans.
Though eligibility can vary by lender, borrowers may be eligible for loan refinancing if their credit profile improved or if interest rates have decreased since they took out the loan. If you’re looking to improve your credit score, making on-time payments and keeping your credit usage ratio low are two of the best ways to raise your score over time.
Refinancing may not be available in all financing situations or for all loan contracts. In order to see if you qualify for loan refinancing, contact your lender directly.