Replacing the existing debts with the loans availed under different terms either from the same lender or from a different lender can be understood as credit refinancing. Refinancing is a strategy to restructure the debts that have been the cause of distress. http://www.creditrefinance.us is the site with informative articles on credit refinancing and its pros and cons.

The reasons for refinancing the existing debts may be too many. It can be either to take advantage of a lower interest rate so that the monthly payment is substantially reduced. Or an individual may opt for credit refinancing to consolidate all debts into a single loan, to simplify things. Some borrowers would like to switch from variable interest rate loans to fixed rate loans.

While going for credit refinancing, it is inevitable to calculate the variable costs of refinancing to avoid incurring more loss. If the monthly repayments get reduced or if other loans are consolidated without a change in the repayment amount, it can be understood that it will only lead to a larger interest cost overall. This only makes the borrower a debtor for a longer time. It should be noted that most of the fixed term loans come with penalty clauses where in the borrower needs to pay a high penalty for an early repayment of his loan and also has to pay the ‘closing fees’ for settling his loans. These factors should be considered and calculated as they can slash the savings generated by credit refinancing.

The lenders who refinance charge a percentage of the loan amount as upfront which is expressed in points. Positive points or larger upfront amount will help in lowering the interest rate. The type of refinancing that comes with ‘no closing cost’ can be advantageous provided the current market rate of interest is lower than the debtor’s existing interest rate. So, clear calculation is needed to choose between the refinancing that comes with lower rate of interest with closing charges and the refinancing that comes without closing cost but with a slightly higher rate of interest.

There are several authorized refinance programs that could be beneficial to the borrowers. VA Loan, the short form for ‘Veteran’s Administration’ loan refinance comes with interest rate reduction to enable the veteran home owners to have lower interest rates. FHA Streamline Refinance, USDA Home Loans, HARP Refinance are some of the authorized refinance programs with unique features for the benefit of the borrowers.

The credit refinancing companies are quite eager to promote themselves by offering loans at lower rates of interest.

Whatever the option may be, the basic features such as the penalty clauses, the degree of risk and the interest rate should be considered before opting for a program. A clear understanding of the terms and conditions is imperative when making a decision on the selection of a particular credit refinancing program.

Although the borrowers are in utter need for a quick solution, it is not advisable to make a speedy decision as ‘haste makes waste’. The purpose of credit refinancing is to improve the financial status and not to aggravate the problem.

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