The Power of Refinancing: A Practical Guide to Lowering Debt
If you're feeling weighed down by high-interest loans or credit card payments that seem to never shrink, refinancing could be a game-changer. By securing a lower interest rate or better loan terms, you can reduce your debt faster and free up money for other financial goals. In this guide, we'll break down how refinancing works, when it makes sense, and how it could help you take control of your finances.
What is Refinancing?
Refinancing means replacing your current loan with a new one that offers better terms - like a lower interest rate or a more manageable repayment plan. The right refinance option can:
- Reduce your monthly payments
- Lower your overall interest costs
- Simplify multiple debts into a single payment
- Free up funds for savings or other financial needs
It can be especially helpful if you’re going through a major life change, such as welcoming a new child, dealing with job loss, or adjusting to reduced work hours.
Example: If you have multiple high-interest credit cards with rates over 20%, refinancing into a lower-rate personal loan could save you hundreds (or even thousands) in interest over time.
Refinancing Options at CAFCU
If you’re considering refinancing, here are some options available to CAFCU members:
- Mortgage Refinancing – Allows you to take advantage of your home’s equity or lock in a lower interest rate.
- Auto Loan Refinancing – Transfer your existing car loan to secure a better rate or payment term.
- Credit Card Balance Transfers – Move high-interest balances to a lower-rate credit union card to reduce interest costs.
- Signature Loans – No collateral needed; flexible repayment terms.
- Share Secured Loans – Uses your savings as collateral for lower rates.
- Access Line of Credit – Borrow funds as needed, up to $15,000, at a competitive rate.
With credit card interest rates skyrocketing - sometimes over 30% - credit unions tend to offer much lower rates, according to the Consumer Financial Protection Bureau.
When is the Right Time to Refinance?
Refinancing makes the most sense when:
- Interest rates have dropped since you took out your loan
- Your credit score has improved, qualifying you for a better rate
- You need to consolidate multiple high-interest debts into one lower-rate payment
- You want to reduce your monthly payments to free up cash flow
Before refinancing, consider factors like closing costs, the length of your new loan term, and any fees associated with the process.
How to Get Started
Not sure if refinancing is the right move for you? Here’s how to begin:
- Check Your Current Loan Terms – Look at your existing interest rates, balances, and monthly payments.
- Review Your Credit Score – A higher score can qualify you for better rates.
- Compare Your Options – Use a refinance calculator to estimate savings.
- Consult a Financial Coach – Get personalized guidance before making a decision.
Let’s Talk About Your Options
Making financial decisions can feel overwhelming, but you don’t have to do it alone. Our Money Compass Financial Coaching program offers free, confidential advice tailored to your situation.
Book a 15-minute phone or online session with one of our coaches today at cafcu.org/MoneyCompass. Small changes can lead to big financial wins - let’s start today!