What is loan re-financing and why one go for loan refinancing? - Business & Economy - Banking - TIK Share

What is loan re-financing and why one go for loan refinancing?


Rahul Rai

2014-04-26

What is Loan Re-financing?

When one should go for Loan Refinancing?

What are the cost related to Loan RE-financing?

Why Loan Refinancing is done?

CA Pulkit Sharma

2014-04-26

Loan Re-financing is a process of closing your old loan and getting a new Loan. For example, suppose you have a home loan with interest rate 11%, and bank is providing another home loan with different terms and conditions with interest rate 9.5%.

You can eexchange your old loan with new loan. This process is called loan Re-financing.

One should go for Loan refinancing if the terms of new loan are better than previous loan. Cost analysis should be done before switching the laon.

Cost depends from bank to bank. Normally bank charges .25% and can be even more but cap is of Rs. 25000.

Loan refinancing is done to restructure the existing loan. If new loan is more cost effective, refinancing can be an option. Sometimes in case of frequent changes in interest rates, one can choose Fixed interest loans or flexible interest loans.

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