 TITLE: Does Refinancing Reset Your Loan Term? CONTENT: When Does It Make Sense to Refinance a Loan?\n--------------------------------------------\nRefinancing a loan can make sense when you can save money by paying less interest, free up room in your budget by lowering your monthly payment, or change other terms of your loan. Generally, you may want to look into refinancing when:\n*   Market interest rates have dropped\n*   Your credit has improved\n*   You have a variable-rate loan and want to lock in a fixed rate\n*   You can lower your monthly payments\n*   You want to remove a cosigner from a loan, such as a parent from a student loan or a former spouse from a mortgage\nSaving money is a common goal. However, if you're looking into refinancing because you're having trouble affording your payments, also ask your lender about hardship options. Lenders may offer to temporarily or permanently modify your loan's interest rate, term or other specifics without refinancing. But generally, this only happens when borrowers are experiencing a hardship and have trouble affording their regular payments.\nYour decision can also depend on the type of loan you want to refinance and the cost involved. Watch out for the following:\n*   Personal loans may have application and origination fees, while credit cards often charge balance transfer fees.\n*   For secured loans, such as a mortgage, see if there will be closing costs that you need to pay or add to your loan amount.\n*   Your current lender may charge a prepayment penalty or fees if you pay off the loan early.\nSay you have a $5,000 personal loan at a 16% annual percentage rate (APR) with 36 months remaining and there's no prepayment penalty. Refinancing with a fee-free personal loan at 13% APR and the same 36-month repayment term lowers your monthly payment from about $176 to $168, saving you about $263 overall.\nHowever, if the lender charges a 5% origination fee, you'll repay $5,250 at 13% APR over 36 months. Even with the lower interest rate, your monthly payment goes up by about $1, and you pay about $40 more overall.\nHere are a few key points to keep in mind if you're considering refinancing different types of debt:\n*   **Credit cards**: You may be able to refinance credit card debt with either a balance transfer credit card or a loan. Balance transfer cards may offer an introductory 0% promotional APR before switching to a standard APR. A personal loan will charge interest from the start, but may be a better option if you'll need more time to pay off the balance, especially if you can qualify for a personal loan without an origination fee.\n*   **Personal loans**: Refinancing a personal loan with a new personal loan can be a fairly straightforward process. However, be careful about refinancing an unsecured loan with a secured debt, such as a home equity loan or line of credit that uses your home as collateral. Creditors can repossess or foreclose on your property if you miss too many secured loan payments.\n*   **Auto loans**: Auto loan refinancing options can depend on your finances, the lender and the vehicle's current value. The process may be similar to when you took out an auto loan for the purchase, but watch out for prepayment penalties on your original loan.\n*   **Student loans**: Private student loans generally don't have origination or prepayment fees. If you have private student loans, refinancing with a lower-rate student loan can be an easy way to save money. But refinancing federal loans with a private loan brings up all sorts of pros and cons. Even if you can lower your interest rate, your loan will no longer be eligible for special federal protection, forgiveness and repayment programs.\n*   **Mortgages**: Low mortgage rates often make headlines because refinancing a mortgage can lead to significant savings. A cash-out refi also lets you tap into the equity you've built in the home. In either case, be mindful of the closing costs as it can take several years to break even; refinancing might not make sense if you plan to move soon. END