Mortgage Loan Refinance
Most people rush into a mortgage loan. They sign on the dotted this with the first lender they speak to. The immediate necessity of money blinds them to the consequences. Later, they realize their fully and repent.
One way in which these people can convert this position to their favor is to obtain a refinance of their loan. By this, they obtain a new loan with favorable rates and conditions to replace the previous loan with unfavorable rates and conditions.
Some people borrow too many loans from too many people. Every month they have to pay a huge list of lenders varying amounts of installments. All these payments add up to a very formidable picture. It is for such people that debt Consolidation was introduced.
By this process the various loans are combined into one loan under one lender. The term of the loan is extended to a very long period and one single average rate of interest is fixed. This reduces the monthly installment amount to 50% or even less as compared to the previous amount.
Refinance or Consolidation?
The differences between refinance and consolidation should be clearly understood and only then you can decide which is more suitable for you.
- If you have too many loans with various lenders, you just cannot refinance each. In such cases, consolidation would be a better option.
- If the market rates have fallen and you want to take advantage of the same, then it is better to go in for refinance rather than consolidation.
- When you compare in absolute terms, you end up paying a little more in consolidation as interest. So, refinance is a better option unless and until you are in risk of defaulting on your loan due to financial crunches.
- Consolidation improves your credit score while refinance worsens it. When you consolidate your old loans, it is considered that you have paid them off and have only one loan to your name. But refinance considers that you have added another loan to your name and this worsens your credit score.
Carefully consider the above points before deciding on the right option best suited for your financial position. This would optimize your monetary situation in the best possible way.