WHAT IS REFINANCING ?
Refinancing refer to shift from a existing debt agreement between a financer (who lends money) and borrower (who borrows money) to a new agreement with new terms & conditions mutually agreed upon by both the borrower and lender as well. Refinancing could be done either with same lender or may be shifted to another lender with better terms.
WHY REFINANCE LOANS?
Refinancing is generally done due to following main reasons:1. Rate of Interest : Due to significant change in interest rate (PLR) customers used to refinance there exisiting loan to get benifited of the reduction in lending rates (caused by RBI new credit policies) this helps to reduce the E.M.I payable by the borrower thereby reducing the debt obligation.2. Principal amount of loan : The borrower may have need of higher amount of the exisiting loan amount to meet up other needs, so in such case it may ask to refinance provided he has got the eligibilty for a sanction of higher loan.3. Time Span of loan repayment : In order to reduce the repayment burden the borrower may ask for refinancing for a longer span to autimatically reduce the E.M.I but payable for a much longer period. Vice versa he may ask for reduction in the loan period as he found himself capable to pay higher E.M.I and square off the loan earlier with low financing interest.4. Change in option : Flexi ineterst rate loan (Where interest payable depends on current interest rate , which alter time to time affected by latest credit policies by RBI) could be shifted to fixed rate loan(Where interest payable at fixed interest rate , not affected by new credit policies by RBI) by refinancing or vice versa.and due to many other reasons it is done as per the requirement of the borrower. It is generally seen that home refinancing is most poplular among various loan options.
Refinance Mortgage
Refinance mortgage loan is to shift from an existing mortgage loan to another loan. This loan is taken on same security asset and is borrowed to settle off the exisiting loan.If there is any additional amount received after settlement of exisiting loan that could only be utilized for meeting any other expense.This is generally done to change the terms of the exisiting loan (As discussed above).
Refinance Home:
Home refinancing is to shift the present home loan to a new one either with the same lender or with a new lender having better terms related to rate of refinancing , period of payment and sanctioned loan. If higher amount of loan is sanctioned it could be utilized for furniture and decoration in home and other co related purposes.
Refinance Rate :
Refinance rate refer to the rate of interest at which the refinancing is done.Generally the rate of interest on loan refinanced is low in comparison to the existing loan and that is principal cause of refinancing.Low refinancingIn the present world of competition different institutions are offering competitive rate for financing thereby attracting customers to shift there existing loan to a new one. The various rate of interest offered in the market could be known by net ,agents and branch office.Bad Credit Refinanace Loan If a individual have a bad track record , meaning defaulter in repayment of loan by E.M.I . In case a borrower fails to make a regular and timely payment of all installment in due date the individual is recorded under bad credit loan. In order to refinance a bad credit loan the rate of interest are much higher (2% to 6%) depending upon case.