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What does it mean to refinance a loan?

Nicholas Hinrichsen - Published: September 15, 2021

Were you asking your self 'what does it mean to refinance a loan?'
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If you want to think about refinancing a loan, its basically getting a new loan to replace your old loan (whether its a car or a home). This is how it works mechanically:

  • You apply for a loan based on your home or car's value
  • The new lender approves the loan
  • The new lender pays off your old loan
  • The new lender now holds the title or deed to your home or automobile
  • You stop paying the old lender and start paying the new one


Often you can save money on your loan refinancing through:

  • Lengthening the term of the loan
  • Finding a lower interest rate
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