Posted by Aol.finance by Kali Hawlk on May 2, 2016
Let’s play a little word-association game. What comes to mind when you hear the word “refinance”? If you answered “mortgages,” you’re not alone. A mortgage is the one type of loan that’s probably most frequently associated with refinancing. But refinancing goes beyond just helping people give their mortgages a makeover: Did you know that the concept of a refi can apply to just about any kind of loan, from your student loans to your auto loan?
Whether you’re renting a pricey studio apartment in San Francisco, CA, or a home in Richmond, VA, if you’re a renter with any type of loan, it’s worth understanding how the process works — and how it can help you.
HOW CAN RENTERS TAKE ADVANTAGE OF REFINANCING?
You can refinance almost any type of debt, not just mortgages. If you have car loans or student loans, for example, you may be able to refinance them. Refinancing simply means you’re taking one loan and replacing it with another, with the new loan having different (and preferably more favorable) terms than the old one. You may want to refinance a loan to get a better interest rate than your original debt carries or to reduce the monthly payment you make. You can also consolidate many loans into a single one. Any of these outcomes can make personal debts easier to manage — and therefore easier for you to repay.
If you have a variable-rate loan and long for a more stable monthly payment, you may want to refinance simply to secure terms that present a little less risk. For example, swapping that variable-rate loan for a loan with a fixed interest rate could help with budgeting. But if you’re thinking about refinancing a loan to enjoy one or more of these potential benefits, it’s important to understand that there are two kinds of refis to choose from: rate-and-term and cash-out.