FDIC Consumer News - Summer 2018
25th Anniversary Edition
[2014] Refinancing Loans: Not Just for Mortgages
Excerpted from “Refinancing Loans: Not Just for Mortgages,” Spring 2014.
Most people know they can refinance a mortgage, but did you know you also can refinance personal loans, including auto loans, credit cards and student loans? Here are tips to help you decide if refinancing makes sense for you.
Think about your goals. Do you want to lower your interest rate? Extend the terms of your loan? Once you determine what you want to accomplish, you can make a better decision about whether refinancing is right for you.
Understand potential pitfalls. While you may be able to take advantage of promotional offers — such as introductory zero-percent interest or lower Annual Percentage Rates (APRs) by transferring a balance from one card issuer to another one and closing the original card account — you also may end up with a higher APR when the promotional rate ends. Closing a credit card account also reduces your available credit and may adversely affect your credit score, so consider keeping cards you have managed well for a long time.
If your credit score is low, consider waiting to refinance until you can raise it. You can protect yourself by ordering a free copy of your credit report from each of the three major credit bureaus (visit www.AnnualCreditReport.com or call toll-free 1-877-322-8228) and correcting inaccurate information. For more tips on improving your credit report and score, see [2003] Your Credit Record and Costly Mistakes to Avoid.