One the first considerations consumers should undertake when thinking of refinancing is what type of debt is to be refinanced. In one sense, refinancing debt of any type is, well, refinancing the debt. However, there are big differences in how that happens, depending on the debt in question. Refinancing your credit card debt is one thing, while refinancing your home loan is completely different. Each type of debt has its own pros and cons and dangers, and consumers should be aware of those issues before they sign onto any restructuring plan.



Refinancing can come about through a true refinancing which is much like turning the old loan contract into a new loan contract, usually with lower interest rates. Another way to refinance is to consolidate various debts into one debt.

If you are thinking of refinancing your home, you should begin by researching the interest rate that you will qualify for with the new loan. You can often get this information from your current lender. There are also many online sources for home refinancing, but do keep in mind that the availability of home refinancing is often dictated by the overall housing market as well as the credit market in general. In other words, there may be times when finding a good home refinancing loan will be harder than at other times. For some individuals and families when the credit market gets tight, it may be impossible to find a new refinancing loan. For this reason, if you are thinking of refinancing your home loan, you should plan early and be ready when the market is ready.

For other types of consumer loans such as automobile loans and personal loans, finding a lender to refinance a new loan may be as easy as visiting your local bank or credit union. It is usually much easier to get a short-term refinance than it is a longer term. The key element, however, will be the new interest rate. If the new rate is not at least 1% lower then you may be wasting your time as there are often some fees associated with these types of refinancing.

Credit cards are a debt unto themselves for many consumers. There are literally millions of consumers who carry two or more credit cards with much (if not all) of their credit line maxed out on each card. Refinancing credit card debt, also known as consolidating credit card debt, can be an effective way to free up more cash per month.

In general, consumers can bundle all (or a big portion) of their credit card debt into one, lower-interest rate loan. Rather than paying several bills at the end of the month, they pay the one bill, which often is lower than what the total of the numerous cards would be. This frees up some cash at the end of the month. There are some hazards to this, however. The biggest mistake people make is that once they have a bit more cash at the end of month they use it to go into more debt, thus eliminating the good that they had just done for themselves.