To do so, you typically need to refinance into a loan with an interest rate that is lower than your existing interest rate.
When you refinance, you often restart the clock and extend the amount of time you’ll take repay a loan.Since your balance is most likely smaller than your original loan balance and you have more time to repay, the new monthly payment should decrease.Change your loan type: Even if you don’t lower your interest rate or monthly payment, it can make sense to refinance for other reasons.For example, if you have a variable-rate loan, you might prefer to switch to a loan with a fixed rate.If you have a loan that’s too expensive or too risky to live with, you can often refinance into a better loan.
Things may have changed since you borrowed money, and there may be several ways to improve the terms of your loan.
To see how interest rates and your loan term affect cash monthly flow, see how to calculate loan payments.
Shorten the loan term: Instead of extending repayment, you can also refinance into a term loan.
A lower interest rate (with all other things staying the same) can also lead to lower monthly payments.
However, simply extending the life of a loan can actually mean you’ll pay more for the loan over the long term.
For example, some business loans are due after just a few years, but they can be refinanced into longer-term debt after the business has established itself and shown a history of making on-time payments. You want to make sure you’ll break even before you pay those costs.