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Refinancing Loans as a Form of Personal Stimulus

The stimulus checks that many countries are giving out to their residents have been nothing short of a godsend for most people. In America record numbers of people were filing for unemployment and the stimulus checks were helping to ensure food was on the table.

If you currently have loans out there, you may be able to refinance them for a lower monthly payment. This money you save can act as your own personal stimulus that comes back every single money, Refinancing $1,000/mo worth of loans down to $750/mo is almost the same as you getting an extra $250 every single month!

refinancing loans

What is loan refinancing?

Circumstances may have changed since you first borrowed your initial loans, and refinancing may be a viable option to lower your overall debt owed and could potentially lessen your monthly loan repayment options.

The process is simple. You are basically replacing your old loan with a new one. This new loan may have a lower interest rate. And since you owe much less than the original amount, the monthly payments should be lower.

Keep in mind that the details of refinancing plans will look different for every circumstance, but understanding how the process goes may give you insight to see if this is a solution to pursue.

Some people with multiple debts may benefit from a debt consolidation loan. This is one loan that replaces multiple smaller debts and loans, resulting in just a single monthly payment.

Refinancing Your Loan Process:

  1. Figure out all of your existing loans and see if consolidating them together will better suit your current financial needs.
  2. Do your research to find the perfect lender that will offer you better loan terms than the current loans you are currently paying on.
  3. Apply for your newly refinanced loan plan.
  4. When approved, your new loan will pay off your previous debt entirely, so you have one loan payment that will cover your new loan payment.
  5. Continue to make payments on your new loan until you have fully paid it off. Later on, it is even possible to refinance that loan as well.

What Refinancing Won’t Change

Refinancing your loans will not remove any of the debt you owe, but will instead make it a more manageable way to continue to pay it off. This means that the debt you currently owe will not lessen the amount of your loan balance, and it is possible to even add to your debt amount when refinancing if you do not stay on top of it.

If you originally put up any form of collateral for your original loan(s), that same collateral may be used for your new loan. For example if you refinanced your home loan, and continue to miss or not make payments on your refinanced loan, the potential to lose your home is still a very real possibility. This is why it’s so important to stay on top of your finances and make choices that you can stick with for the foreseeable future.

Advantages of Refinancing Your Loans

Even though there are additional risks that come with refinancing your loans, there are also benefits that may make refinancing a more attractive option.

  • Lower Interest Rates: One of the more popular reasons for refinancing is that your new loan can come with lower interest rates compared to your initial loan. Aspects like your credit score and market conditions will play a part in the amount of your interest rates, so if circumstances have changed for the better from your original loan, it may be a great option. In the long run, having a lower interest rate can also lead to significant savings over time, especially with your longer term loans.
  • Lower Monthly Payments: Just like with your interest rates, refinancing may also lead to lower monthly payments you have to make when paying off your loan. These two aspects alone can be extremely beneficial and lead to a healthier monthly cash flow as well as aiding your budget with your monthly expenses.
  • Consolidate Debts: For people with multiple loans, consolidating them into one loan payment is another reason so many people are starting to refinance. This can allow for a smaller risk of missing your debt monthly payments, because one amount is far easier to track then multiple.
  • Loan Terms: It is possible to extend your repayment options with your current loan, it also might be worth it to refinance and receive a shorter-term loan. Even if refinancing leads to higher monthly payments with lower interest rates, you could end up paying less, by getting your loan paid off in a shorter loan term.

What Can You Refinance?

Refinancing your Mortgage: There are circumstances that may qualify for  better repayment options for your mortgage with refinancing. If your current interest rates are at least 1 percent lower than your current rate, refinancing may mean less money that is owed each month. Refinancing your mortgage can lead to lower payments, and if you plan on staying in your current home for at least the next 5 or so years, it may make the most sense financially.


We are almost at the halfway point of 2020 and mortgage rates are at a historic low. Many homeowners are refinancing their mortgages to take advantage of these lower rates. If you are currently paying on a mortgage, it may benefit you to reach out to your lender about a refinance.

Refinancing Student Loans: Student loans can account for a large amount of your debt owed, and refinancing them can help tremendously. Essentially the same formula as with your mortgage, refinancing your student loans can get you a lower monthly rate which opens the possibility of paying more each month if you can, ultimately paying off your new debt quicker. The overall cost that you could be saving by refinancing those student loans may make more sense now, than it did when you first received your loans.

Refinancing Car Loans: Between the period of time when you initially received your auto loan, interest rates may have changed and could potentially save your more money through refinancing. For first time car loan borrowers, it may make more financial sense to wait at least a year to refinance from when you first applied for your loan. Giving your credit score and financial status time to change can bode well when getting approved for a lower loan amount and a subsequently lower repayment rate.

Credit Card Refinancing

Now, your credit cards aren’t like a traditional loan that you make regular monthly payments on, but you can still apply the same refinancing principles to them. You’ve got two options:

  • Take out a loan to pay off your credit card debt. Whichever loan you decide on will undoubtedly have a lower interest rate than your credit cards are charging you. Just be sure to have the discipline not to run up debts on those cards again once they’re paid off
  • Zero-balance transfers are offered by competing credit card companies as a way to win your business. They will pay off your current cards for you, and you will now owe them from a single monthly bill. These offers are usually accompanied by a 12 month interest free deal to help sweeten the pot.

Refinancing is wildly popular right now in the face of Coronavirus/Covid-19. Because the economy is in a slump, interest rates across the board are at an all time low. Shop around for some good interest rates and loan options in order to make a refinancing deal into your own personal stimulus!

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Blogging since 2014, he has the expertise and excellent knowledge about finance. Currently working as a researcher. Responsible for banking and mortgage coverage on Personal Finance. You can reach Tiffany Wagner at

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