Refinancing is a banking term that applies to loans. To re-finance something is to finance it again by paying it off and reconfiguring the loan to better fit your budget. The loan’s payoff term may end up longer but the periodic payment’s can be significantly lower.
Refinancing is common when it comes to car loans and home loans. It is done for multiple reasons and can be very beneficial.
One reason to refinance a loan is to have lower monthly payments. This is accomplished by having a lower interest rate, longer loan term, or both. You may need more room in your budget for bills or other means and refinancing may be your remedy.
Another reason to refinance a loan is to add or take away an individual from the loan obligation. If two people get married, both spouses may want to have the house or car(s) in both of their names. If two people split up, they may not want to share responsibility for the loan. Refinancing can take care of both of these situations.