How to Refinance & Restructure

Refinancing mortgages or even automobile loans can help an overall financial restructuring. When broken into pieces, restructuring is not difficult. Mortgage debt is the largest debt for many people, along with credit cards and automobile debt. Refinancing loans or negotiating interest loans or lowering interest rates can lead to hundreds of dollars each month in savings or lower payments. Nonprofit credit counselors, such as those affiliated with Consumer Credit Counseling Service, can help with financial restructuring, or you can do it yourself.

Instructions

1

Check your credit report and score. Generally, you'll need a credit score of 620 or higher to qualify for refinanced loans. Your approval chances increase significantly with scores of 720 or higher. View and print your credit report from AnnualCreditReport.com -- the only website authorized by the Federal Trade Commission to offer free credit reports under the terms of the Fair Credit Reporting Act. After receiving your report, follow included instructions to order your credit score separately, for a fee.

2

Review your mortgage with a loan officer at your bank or credit union. Ask the loan officer if your loan is competitive with rates currently being offered. Tell the loan officer about your credit situation, including your score. Ask if you likely are eligible for a refinanced loan offering a significantly lower interest rate and monthly payment. Also ask about switching to a fixed-rate loan if your current loan is adjustable. Apply for a mortgage refinancing if you're eligible for better terms and cost savings.

3

Study your automobile loan with a loan officer to determine if there are any savings available with it as well. Note that a lower monthly payment doesn't always indicate a savings. Stay away from refinanced car loans that drop the monthly payments by extending the term of the loan. Over the long run, you will pay more for the loan because of the added payments. Refinance your car if it makes sense financially.

4

Contact each of your credit card companies to ask for a lower interest and a reduction of some fees, such as the annual interest rate. Tell the card company in writing or over the telephone that you are restructuring your finances and looking for savings wherever possible. Emphasize your loyalty to the card company as you negotiate. Keep calling back every few months if you are turned down.

5

Review all other debt in the same manner. Your goal for each debt obligation is to reduce the interest rate and lower the monthly payment while not extending the term of the loan. Avoid debt consolidation loans, if possible. The loans can help with restructuring, but you're still left with the same amount of debt after the consolidation. Also, some people make the mistake of consolidating credit card and other debt only to start carrying balances on the cards again. Focus on ways to reduce debt and not just move it around.

6

Eliminate some spending from your budget to free up cash for paying down debt or contributing to your savings. Track every dollar you spend for a month by jotting notes into a journal. Then analyze your spending to find ways to cut back. Reduce the number of cable channels you are receiving or cut back on eating out. Go through the budget line by line to find savings.