How to Refinance Debt

Americans tend to rely on debt to fund their lifestyles. This tends to create several different monthly payments to several different lenders. To help curb the interest expense on debt, a borrower can refinance that debt to lower payments and interest rates. In addition, that same borrower can consolidate all or a majority of his debt into one lower payment to pay off the debts faster and cheaper than having several individual debts.

Instructions

1

Sort through all monthly debt statements. Categorize them based upon type. Make one stack for credit cards, another for installment loans (such as student or car loans) and another for mortgage debt.

2

Call all credit card companies and request a lower interest rate, if on-time payments have been made for the past year. Cite payment history and credit score (if above 700) as reasons for a rate decrease. Ask for a supervisor if the rate is not lowered. Keep a record of all interest rates prior to and after the request to ensure that your request was processed.

3

Consolidate all student debt, if applicable. Ask your current lender with the lowest interest rate if it will pay off your other student loans and add those amounts to your balance. This will simplify your monthly payments and, usually, lower your payment at the same time. The lender will provide you with the necessary paperwork at the time of your request.

4

Contact your car loan servicer (usually listed on your monthly statement) to see if lower refinance rates are available. To calculate if it is worth refinancing, divide the closing costs by the per month savings. If it takes you less than a few months to break even, consider refinancing the rate through your loan servicer.

5

Contact your mortgage loan company and request current refinancing rates. If the interest rates are one or more percentage points lower than your current interest rate, it is time to consider refinancing. Additionally, calculate how much you save per month on the new mortgage. Divide that number into the total closing costs to see how long it would take you to break even on the expense. Consider refinancing if the number is less than 24 months.