Newsletter 2021 V1 Article - Financial Wellness
Due to changes in the economy during 2020, rates have been favorable for borrowers, and you may have heard about friends and family refinancing their loans.
So what is refinancing, and is it something that you should do? Though UMassFive can’t refinance loans that you already have with us, if you do have loans from other financial institutions, you may want to consider refinancing those loans and taking advantage of the savings you could realize with a lower rate or a better term. Here’s some information about what to consider:
What is Refinancing?
Refinancing refers to the concept of replacing an existing loan with a new loan that provides better terms or features that can improve your financial life. This may mean that you could have a lower interest rate, a smaller payment, or a shorter repayment term. You can refinance auto loans, personal loans, student loans, your mortgage, and most other types of debt.
What is the Process of Refinancing?
Since refinancing does involve creating a new loan with new terms, you’ll have to go through the application process again. That means if you’ve had major credit challenges since you took out your original loan, you may not qualify for better terms—on the other hand, if your credit score has improved since you took out your loan, you might qualify for an even better rate!
What to Consider Before Refinancing:
Did your loan have any special features? Refinancing at a lower rate may sound like a great idea, but you’ll want to be careful that you’re not exchanging those savings for inconvenience. Federal student loans, for example, usually offer more flexible repayment plans than private student loans do.
Remember paying closing costs on your home? If you’re looking to refinance your mortgage you could save quite a bit over the lifetime of your loan with just a 1% rate adjustment. You’ll want to be prepared to pay those costs again, though, so it’s worthwhile to make sure the savings from the updated loan terms will offset that amount.
If you’re considering taking advantage of the existing low rates by refinancing, take a moment to review the interest rates on any loans you currently have, and then check out our rates to see if we can do better for you!
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For more information about refinancing your loans from other financial institutions with UMassFive, or to apply, please visit our Loans page and select the type of loan that you are looking to refinance.