When Refinancing Loans Are Not For You

2007-03-08 10:33:40

( Financial )



You may be tempted by a lot of refinancing offers being offered to you in the mail, or by an advertisement you have seen on television. Some offers boast the lowest refinance loan rates ever, some promise to lower your monthly payments. However, refinancing loans like your mortgage may not be the best option for you.

When refinancing loans, evaluate your personal circumstances first. Evaluate your current situation. Ask yourself if you are having trouble meeting your monthly payments. If you are not in need of extra cash, ask yourself why you need to refinance any of your loans. Do your research and make sure you can afford it. Make sure your step in refinancing loans will not affect your credit history in any way.

Refinancing loans will get you the same inspection as if you were taking out your first mortgage. Lending institutions will evaluate your ability to pay in the future. They will evaluate your income in direct proportion to your debt. If you currently have outstanding credit and you refinance when your income has dropped the same time your credit card spending has gone up, it may cause a little trouble for you.

Regardless of the points above, you will always find a willing lending institution that can accommodate your business. However, always read the fine print. In refinancing loans like your mortgage and student loans, you may find that the rates are higher than the original ones that you had.

So figure out the costs after loan refinancing and compare them with the payments that you are making now. Do not just look at the monthly figure; look at the total amount as well. You may be paying lower monthly amortizations but the total amount you have paid may be impractical. You may find that refinancing may not be the option for you.


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