Refinance for lower interest rates.
Take out a 2nd loan to pay off 1st loan at reduced interest rates. when you’re able to refinance that loan, you could be paying substantially less interest on the principal—which is the amount you borrowed from a lender.
In other words, debt refinancing can lower your overall rate. You’re borrowing for less.
The option to refinance gives you the chance to limit the damage that pricey short-term borrowing can do to your bank account or cash flow. This may be applicable for a single loan or combination of two or more loans. Target is to reduce your overall interest payment.
Refinance to get longer repayment duration.
Another reason to take out a debt consolidation loan is if that second loan comes with a longer term. In other words, you’ll have more time to pay off the money you borrowed (plus interest).
You might look for a longer term because your current loan’s payments are cutting into your cash flow, you want to lower each payment amount, or you want less frequent payments—like weekly or monthly instead of daily payments.
Regardless of the exact benefit you’d want, a longer loan term is one reason why plenty of business owners search for debt refinancing.
Refinance to get more money.
That second loan comes with a bigger pile of cash you can use to grow your business.
By refinancing your debt with a larger loan amount, you can invest more capital into your business without taking out multiple loans at once or waiting to finish paying off your first round of funding.
Of course, a portion of that second loan will go toward paying off your first loan, but so long as what’s left over is more money than you would’ve had otherwise, refinancing makes perfect sense.
More often than not, you would refinance because of some combination of these reasons—maybe even all three.
Refinance to pay your credit card debt.
This one is straightforward: Instead of paying higher rates on credit card bill, take a short term loan & use the funds to pay off your Credit Card bill.
Interest rate of credit card usually ranges from 2.5% to 3.5% per month. Here refinancing will offer you lower interest rate plus extra credit days.
All we say is don’t be a victim of loan shark.