Tired of living paycheck-to-paycheck?
It’s a stressful cycle to break. And when an emergency expense comes up, it can throw off your entire budget. When trying to cut expenses, people often forget the option of refinancing. It’s not only helpful as far as payments go, but can save you thousands in the long run.
If you’ve fallen behind on payments or are simply looking for ways to stretch your budget, refinancing allows you to pay back loans with wiggle room in your finances. If you haven’t discussed refinancing with your lender, now’s the perfect time to do so.
Loan modifications are one thing, but our team at WEOKIE takes a more balanced approach to finances. Or, if your loan is with another lender, we offer financial counseling services to help you better manage your expenses and improve your credit score.
The Process of Refinancing
When you refinance your mortgage or car, you’re paying off the existing loan and replacing with a new one, similar to the process of acquiring the original loan. The process begins with completing an application.
The lender will assess your income, assets, credit score, debt, and the value of your car or home. They will weigh these with how much you still owe, how much your auto or home is worth, and the amount you want to borrow.
Typically, lenders follow a loan-to-value (LTV) ratio. This formula weighs your car or home’s appraised value and the total amount of the loan. In order to refinance, the LTV ratio must follow the lender’s guidelines.
What Perks Can I Expect With Refinancing?
No two people are alike nor are their financial goals. Credit unions exist to serve their members, and because of this, they’re able to tailor payments and rates to meet your needs. There are commonly five perks you can expect when refinancing:
- Reducing Your Payments: If your mortgage or auto loan is too expensive, you can reduce your payment by refinancing the remaining amount you owe at a lower interest rate at a term relatively close to your current loan.
- Extending Your Term: Another option you have is extending your loan term. This can be helpful for those trying to escape the paycheck-to-paycheck cycle but does have its drawbacks. You’ll be increasing the amount of interest paid over the life of the loan and your equity will build at a slower pace or could decrease with an auto.
- Lowering Your Interest Rate: If interest rates have dropped, you can refinance your mortgage or auto loan at a lower rate. Often, you can also get a lower rate by decreasing the loan term. Doing this will score you a higher payment in the short-term, but you’ll build equity faster and reduce interest.
- Refinancing Other Loans: Mortgage and auto loans are the most popular, but you can bundle others and save even more. Loans on boats, RVs and other belongings are normally higher, but you may score lower payments compared to traditional banks.
- Consolidating Expenses: It’s easy to forget a payment when you’re juggling multiple payments, financial institutions and due dates. Ease the burden on yourself by consolidating your debts and loans. Not only does it save you headaches, but you’ll be able to account for a single interest rate and payment.
Something to Note
Refinancing is often a wise financial choice for most people, but there are some things to watch out for. If a lender is advertising “no-cost” refinancing, make sure you understand what that means. If the lender is paying the closing costs, then you’re in the clear. But if the refinancing fees are included in your new loan, you’re increasing the loan amount and will be paying interest on those fees.
We’re Here to Help
To learn more about refinancing and how it can help your situation, give WEOKIE a call at (405) 235-3030 or 1(800) 678-5363. We’ll discuss your needs and put you on the right path toward financial freedom.
Click here to access our online loan application now.
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