Examples of Refinancing
1. Mortgage Refinance: Mr A has 20 years of fixed rate mortgage. The rate of interest on this loan is @9%. At present, due to some economic factors, the rate of interest has fallen to 6%. Now, Mr A can take advantage of the decreased rate of interest by refinancing their existing mortgage loan with the new one of @6%.
2. Consolidation: Sam who is a student of ABC College, has taken a few loans for his studies, which can be termed as education loans. He is facing issues with the monthly payment of several loans. It is becoming a cumbersome process to keep track of his payments of various loans. To overcome this situation, he plans to refinance his loans by raising a new single loan. This will benefit him to maintain track of his monthly payments and will make the process simple.
3. Business Loan: Zera Ltd. is a public company that has raised a few business loans. It is seen in the financial data of the company that the cost of the loans is getting high and monthly payment of loans is becoming a complicated task. Zera ltd. would want to reduce its cost as it will directly affect the profit of the business. Refinancing the loan would help the company to lower the cost and make the payment process easy and simple.