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Borrowing a large sum of money is a major commitment.
However, it doesn’t mean you’re stuck with the same lender for the entire duration of the loan. With loan refinancing, you can replace an existing loan with another. Loan refinancing is available for different types of products, including mortgages, auto loans, personal loans and more.
Why refinance a loan? It’s typically a way to get better terms, save on interest and benefit from lower monthly payments.
Is refinancing a good option for you? We share five signs that indicate your loan could be a good candidate for a refinance.
Do any of these sound familiar? If yes, refinancing your loan could be a smart financial move.
1.) Interest Rates Have Dropped
The Federal Reserve started cutting interest rates in late 2024 after two years of steadily high rates. While other factors can influence loan APRs, this trend means lenders are offering lower rates compared to 2022 and 2023.
If you took out a loan when rates were at their highest, a loan refinance is a great way to take advantage of recent cuts.
You should also note that not all lenders offer the best terms when you apply for a loan. For instance, applying for an auto loan at a dealership often results in additional fees and higher interest. If you have an existing loan and don't believe you got the best offer possible on it, looking into a refinance can be interesting.
2.) Your Financial Situation Has Changed
Lenders look at your financial profile when reviewing your loan application. Factors like your income, credit score and debt-to-credit ratio ultimately impact the decision. They can also dictate your interest rate.
Has your financial situation changed since you took out the loan? If you have a new, higher-paying job, a better credit score or have managed to improve your debt-to-credit ratio, you’ll likely qualify for better terms if you decide to refinance.
3.) You’re Struggling With Making Monthly Payments
Ideally, debt payments shouldn’t exceed 30% of your income. Mortgage, loan and credit card payments can add up to more than 30% for many different reasons.
Struggling with debt repayment is a stressful situation. It can make it difficult to save for the future and even get in the way of covering essential needs. Plus, you might face late payment fees.
We recommend looking into loan refinancing with a credit union if you find yourself in this situation. You may be able to negotiate a longer term, pay less in interest and benefit from lower monthly payments.
Thanks to their not-for-profit model, credit unions are able to offer lower ARPs and fees compared to traditional banks. They’re also more likely to consider a wide range of factors beyond your credit score when making a decision and can be more flexible with lending terms.
4.) You Can Afford Larger Payments
As long as your current loan doesn’t come with a penalty for early payment, there is nothing keeping you from making larger payments and paying your loan off faster.
Refinancing has benefits if you find yourself in a position to increase your debt payments. Because APR is partly based on loan duration, refinancing and asking for a shorter term often means qualifying for a lower rate.
This is especially noteworthy with mortgages, where a shorter term means achieving your goal of home ownership faster and can help you save on total lifetime interest costs.
5.) You Have New Financial Goals
Do you have new financial goals? Now is the right time to review your credit lines and consider whether loan refinancing is a good option for you.
If you have several credit lines, consolidation could be a good option. This type of loan refinance merges two or more credit lines into one, making debt easier to manage.
Do you need a lump sum to cover a major expense, a home improvement project or pay off high-interest debt? A cash-out mortgage refinance could be a great option. This product allows you to tap into the equity you have built into your home by replacing your current mortgage with a larger one. You’ll receive the difference as a cash payment.
You’ll also benefit from low rates and flexible payment terms on several lending products, including mortgages, auto loans, recreational vehicle loans, personal loans and more.
Let’s talk about your refinancing needs. Explore our mortgage refinance products, contact us to learn more about our other loan refinance options or visit one of our South Florida branches!
Summary: Is it time to refinance your mortgage or loan? Let’s look at a few common signs that indicate your finances could benefit from a loan refinance.
Borrowing a large sum of money is a major commitment.
However, it doesn’t mean you’re stuck with the same lender for the entire duration of the loan. With loan refinancing, you can replace an existing loan with another. Loan refinancing is available for different types of products, including mortgages, auto loans, personal loans and more.
Why refinance a loan? It’s typically a way to get better terms, save on interest and benefit from lower monthly payments.
Is refinancing a good option for you? We share five signs that indicate your loan could be a good candidate for a refinance.
Five Signs It’s Time to Refinance Your Loan
Do any of these sound familiar? If yes, refinancing your loan could be a smart financial move.1.) Interest Rates Have Dropped
The Federal Reserve started cutting interest rates in late 2024 after two years of steadily high rates. While other factors can influence loan APRs, this trend means lenders are offering lower rates compared to 2022 and 2023.
If you took out a loan when rates were at their highest, a loan refinance is a great way to take advantage of recent cuts.
You should also note that not all lenders offer the best terms when you apply for a loan. For instance, applying for an auto loan at a dealership often results in additional fees and higher interest. If you have an existing loan and don't believe you got the best offer possible on it, looking into a refinance can be interesting.
2.) Your Financial Situation Has Changed
Lenders look at your financial profile when reviewing your loan application. Factors like your income, credit score and debt-to-credit ratio ultimately impact the decision. They can also dictate your interest rate.
Has your financial situation changed since you took out the loan? If you have a new, higher-paying job, a better credit score or have managed to improve your debt-to-credit ratio, you’ll likely qualify for better terms if you decide to refinance.
3.) You’re Struggling With Making Monthly Payments
Ideally, debt payments shouldn’t exceed 30% of your income. Mortgage, loan and credit card payments can add up to more than 30% for many different reasons.
Struggling with debt repayment is a stressful situation. It can make it difficult to save for the future and even get in the way of covering essential needs. Plus, you might face late payment fees.
We recommend looking into loan refinancing with a credit union if you find yourself in this situation. You may be able to negotiate a longer term, pay less in interest and benefit from lower monthly payments.
Thanks to their not-for-profit model, credit unions are able to offer lower ARPs and fees compared to traditional banks. They’re also more likely to consider a wide range of factors beyond your credit score when making a decision and can be more flexible with lending terms.
4.) You Can Afford Larger Payments
As long as your current loan doesn’t come with a penalty for early payment, there is nothing keeping you from making larger payments and paying your loan off faster.
Refinancing has benefits if you find yourself in a position to increase your debt payments. Because APR is partly based on loan duration, refinancing and asking for a shorter term often means qualifying for a lower rate.
This is especially noteworthy with mortgages, where a shorter term means achieving your goal of home ownership faster and can help you save on total lifetime interest costs.
5.) You Have New Financial Goals
Do you have new financial goals? Now is the right time to review your credit lines and consider whether loan refinancing is a good option for you.
If you have several credit lines, consolidation could be a good option. This type of loan refinance merges two or more credit lines into one, making debt easier to manage.
Do you need a lump sum to cover a major expense, a home improvement project or pay off high-interest debt? A cash-out mortgage refinance could be a great option. This product allows you to tap into the equity you have built into your home by replacing your current mortgage with a larger one. You’ll receive the difference as a cash payment.
What Happens When You Refinance a Loan?
Refinancing a loan is a simple process:- Start by shopping around and comparing the interest rates and terms different lenders can offer.
- Once you’re pre-approved for a refinance offer, you’ll have to share the details of your existing loan with your new lender.
- Your new lender will then finalize the loan and transfer the money to the old institution to close your credit line.
- After that, you'll be making monthly payments to your new lender under the terms you negotiated.
Loan Refinancing With Power Financial Credit Union
Power Financial Credit Union makes loan refinancing easy. Thanks to our simple application process, you can get your loan offer quickly. Plus, we’ll consider a wide range of factors when reviewing your application and look beyond your credit score.You’ll also benefit from low rates and flexible payment terms on several lending products, including mortgages, auto loans, recreational vehicle loans, personal loans and more.
Let’s talk about your refinancing needs. Explore our mortgage refinance products, contact us to learn more about our other loan refinance options or visit one of our South Florida branches!
Summary: Is it time to refinance your mortgage or loan? Let’s look at a few common signs that indicate your finances could benefit from a loan refinance.