Refinancing or new loan: what comes out cheaper?

by Peter Clark

Refinancing a loan or financing is a common option for anyone who wants money in a more emergency way. However, there is also the option of getting a new loan to clear your previous debts. Which of these options is best for your financial health? Let’s compare some of them.

Refinancing: What is it?

Refinancing: What is it?

A refinance is a new loan that you take out to repay your old loan. A traditional refinance will require that you have already taken out a portion of the loan or financing, usually between 20% and 30%.

Why Refinance?

Why Refinance?

There are many reasons why you may want to refinance a loan or financing. For example, you may want to reduce your payments or interest rate. Or you may want to extend or shorten the duration of your financing, or add or remove someone from your existing loan or financing.

What happens when you refinance?

What happens when you refinance?

It is similar to the process of when you obtained your loan or original financing. As this is a new loan, you will receive a new loan / financing number and your new loan may have different terms than your old one.

Before contacting the lender to consider refinancing, it is recommended that you review your financial situation or get a professional credit report. Generally speaking, the higher the credit rating you have, the better the interest rate for which you qualify, and the more money you will be able to save. You will also need to show enough income to pay for the new payments as well as the expenses of your home. It is important to be up to date on your financing payments for a property, car and credit card for at least the last twelve months when considering refinancing to stay within your budget.

What are the costs involved in refinancing?

What are the costs involved in refinancing?

Just like a regular loan or financing, it is important to compare the Total Effective Cost of Refinancing with the CET of the current loan or loan to know if refinancing is worth it. A smaller CET means lower total interest costs, and more money left in the portfolio.

Refinancing or using a new loan can be good options for repaying your debts with interest or more advantageous installments to your pocket. (Photo: Credit.com)

New loan to repay financing or another loan: how does it work?

New loan to repay financing or another loan: how does it work?

To repay your current financing or loan debts, a person can either use credit portability or get a new loan with more advantageous terms to pay off existing debts. The main reason to consider this new loan is to have more affordable payments, with better interest and payment terms than a refinancing loan. It is also the option used for those who do not yet have a minimum of 20% to 30% of capital already paid by the loan and financing, which automatically excludes a person from the possibility of refinancing.

What can I change by getting a new loan to pay off my current funding or debt?

What can I change by getting a new loan to pay off my current funding or debt?

Looking for a new loan means completely changing the terms of your current loan or loan. This may include lowering the interest rate or changing the payment scheme for SAC or PRICE, for example. It is also possible to reduce or increase the number of installments of the loan by facilitating payment terms.

It is worth remembering: before confirming the new loan, compare the CET of your current loan or loan to ensure that the values ​​of the new loan are more advantageous.

Refinancing or new loan: what comes out cheaper?

Refinancing or new loan: what comes out cheaper?

It depends largely. Generally, a refinancing makes it possible to increase the number of installments of a loan or loan more than the reduction of the CET. But for example, when the rate rate falls and the interest rates of the banks also fall as a result, if you obtained a loan or loan with a higher rate, you may be able to refinance with more advantageous interest rates when it goes down. It is always good to go comparing to see when it is a good refinance deal. If the interest has gone down but you do not yet have a minimum amount paid for your loan or financing, there may be the option of portability of credit or obtaining a loan / financing in better conditions, although it may be a little more difficult that.

In both cases, refinancing or new loan, it is possible to increase or reduce the installments that are still due. This can result in smaller installments in the financing / loan, which can relieve a little in the pocket every month. However, it is important to remember that more installments can mean more interest being paid, and less installments, less interest. Evaluate your financial situation well to be able to pay the highest possible amount in the installments and pay off your debt as soon as possible.

What would you rather do: refinance or get new loan? What is best for your finances? Ever had to refinance or get a new loan?

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