Creative Refinancing Strategies You Didn’t Think Of
After chipping away at your mortgage, credit card bills, or loans for a few years, it is likely that you’ve noticed just how big of a chunk it makes in your wallet. Whether you need extra money to meet your needs, you want lower interest rates, or you have other cash problems, creative refinancing strategies are now a real solution.
Depending on your particular situation, there are several ways that creative refinancing can change your life. If you’ve been paying the same bills for years, it’s likely you’re in a different financial situation than you were in the beginning.
Lower Your Interest Rate
If you’re paying off your mortgage, credit card bills, or an auto loan, it could be time to refinance. If you’ve improved your credit since the last time you applied, it’s possible that refinancing could mean big savings. This could come from typical refinancing or from getting a personal loan with a lower interest rate.
Essentially, refinancing can create the possibility of a lower interest rate. In long-term savings, that could mean thousands of dollars over time. The larger the loan or mortgage, the more you could save in a lifetime. If your credit score has improved over the years, visit your local bank or check online to see if a better option awaits.
Even 1-2 percent can make a huge difference in your savings account if you’re paying off a mortgage, auto loan, or large personal loan. Today, the lowest personal loans rates to date are Earnest (5.25 – 12.99 percent), SoFi (5.19 – 14.24 percent), and Citizens Banks (5.99 – 16.24 percent).
In addition to an improved interest rate, it’s also possible to simply negotiate a lower monthly rate. For credit cards, simply call your company and ask if it is possible to pay a lower rate. This way, you can improve your cash flow and then possible negotiate the credit card once more to pay it off completely.
The same idea works for a mortgage or an auto loan. If you could pay less money per month and invest that money in another venture, it’s possible to use that extra money to pay off your home even faster.
Cashing Out Of Your Mortgage
If you’ve built equity in your home, you can use the value of your home to finance the amount you’ve accumulated in the home. A cash-out refinance option allows for homeowners to borrow more than they owe and keep the difference.
Most mortgage lenders will let you borrow 80 percent of your home’s value. If your home is worth $220,000 and you owe $150,000, then the equity is $70,000. With this option, you could get a good chunk of cash for whatever you need.
Refinancing Risks to Think About
For student loans, as well as other types of debts, there are risks to consider. First of all, if you have a federal loan and then refinance with a private loan, you will lose the protection that comes from a federal loan. For those who have a low income for over 20 years, some programs have student loan forgiveness, which could be lost.
Next, if you switch from a fixed interest rate to a variable interest rate, it could mean paying more in the future. The last fives years have made many investors believe that interest rates will remain low, but history tells us otherwise. Make sure to find a lender that offers interest rate caps for your own protection.
Where to Begin With Refinancing A Loan
Whether you’re drowning in credit card debt or simply looking for a slightly better interest rate, there are various outlets to consider. If your credit has improved since your loan began, consider refinancing with a personal loan. A personal loan could save you 1-2 percent, if not more if your credit score has improved over time. This could mean saving thousands of dollars, especially if the debt is a large amount.
If you simply want more money in your wallet, consider negotiating a lower monthly payment or cashing out of your mortgage. Both options will allow for you to have more money, so you can also pay off larger chunks that are due each month. With any option, there are risks involved. Within that respect, make sure to read the fine print, do your research when finding the best option, and live within your means in order to get out of debt and start creating wealth.