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Refinance and Refinancing

The benefits of refinance

Most people lock themselves into a loan and chip away at it slowly over the years, without looking into their options and re-evaluating things down the track. The truth is, refinance comes with many benefits and is definitely something you should be considering.

What does Refinancing Mean?

Refinancing occurs when you revise your interest rate, payment schedule, and terms on a loan. It is often best to consider refinancing your loan if substantial changes occur with interest rates, as it could end up saving you lots of money in the process. You write up a new agreement with the new terms set under it.

Different Types of Refinance

In general, refinancing applies to mortgage loans, car loans, and student loans. There are different ways you can refinance a loan:

Rate and Term Refinancing

This is the most common type of refinancing, where the original loan is replaced with a new loan that has lower interest payments.

Cash-out Refinancing

These are used for loans where something has been put up as collateral, for example, your house. If that increases in value, you can withdraw the value for a higher loan amount.

Cash-In Refinancing

This option allows you to pay down some of your loans for smaller loan payments.

Consolidation Refinancing

If you have lots of different loans in action, this type of refinancing enables you to take out a loan that is lower than your current interest rate across all loans.

Benefits of Refinancing Your Loan

Refinancing your loan comes with many benefits, and these can vary from lender to lender. Here’s a guide to some of the benefits you can expect from a refinance.

A better rate

Unsurprisingly, this is one of the most common reasons people refinance loans. Interest rates may have gone down, or your credit may have improved. This could mean you are eligible for a better rate than you are currently paying.

Lower payments

 One of the benefits that come with a lower interest rate is that your monthly payments are also reduced. You also have the option of extending your pay off date. By taking longer to pay your loan back, you will also have less to pay each month.

Lock-in contracts

If you are currently on an adjustable-rate for your loan, you can choose to refinance into a fixed-rate for the remainder of the loan. This has the benefit of letting you lock in a good interest rate, and you can also plan out your payments.

Shorten your loan

mortgages, in particular, are long-term loans that span across decades. You may start off with a 20-year loan and then refinance when you are in a better position to make it a 10-year loan and pay off faster. The rates on a shorter loan are also much lower, so you will end up paying less.

Cash-out

The cash-out refinancing discussed above provides you with access to money when you need it. You can borrow against the amount your equity has risen and have access to that cash immediately. Mortgages tend to have lower interest rates than other loan types, so this can be a great way to do it and save yourself money in the process.

Consolidate debts

You can use the money from the cash-out refinancing to pay off other debts you may have owing, so you save on interest rates. As mentioned, mortgage interest rates are generally a lot lower than other types of debt. This also means you can reduce how much you are paying off each month, as mortgages are long-term debts.

How it Works

Despite all these benefits that come with the loan refinance, it is important to think your decision through properly before going ahead. When you refinance a loan, your lender pays off the initial loan for you and then you take out a whole new loan with the new terms. There are fees involved in this process, so you want to make sure the savings are worth it at the end of it all.

You have to pay an application fee to start the process, which covers the credit check and administration costs. If your application is denied, you won’t receive a refund. Once approved, you then have to pay a loan fee, which covers the lender’s administration and financing costs.

Some of the other costs include an inspection fee, recording fees, attorneys’ fees and more. The most important thing to do before you head down this path is to add up the costs and savings and see how they balance out in the long run.

There are so many practical advantages that come with refinancing your loan, so make sure you look into it and don’t just keep paying off your loan without a thought. You could potentially save yourself plenty of money in the process and have that loan paid off even faster.

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Refinance and Refinancing

Breaking Down the Notion of Short Refinance

In everyday life, when you refinance, you simply exchange a pre-existing loan with another one in order to get perks like a better term and lower interest rates. However, sometimes, the lender is the one who tells you to refinance.

It is unfortunate, yes, but many people become victims of foreclosure because they cannot keep the pace with their monthly repayments. You’ve signed a contract, and you knew that it was secured on your house; therefore you were always at risk of losing it if you fail to make payments. But not all is lost, even when you’re on the brink of this abyss.

Why Foreclosure Is Bad for Both Parties

Receiving a foreclosure notice is every indebted person’s worst nightmare. The foundation of your world crumbles; you panic and think you’re going to end up on the streets.

In some cases, that is not far from the truth. With all these, not many people are aware of the fact that foreclosure is a “lose-lose” situation. Why? Let’s imagine that the collateral you’ve secured the loan on is your house.

When foreclosure is involved, the bank will try to get some of the money you owe back by selling the house. If there’s not enough equity in it, they’ll get only a part of the debt back.

So – how do banks prevent this from happening? Through a short refinance program meant to help the both of you.

What Is Short Refinance?

To avoid foreclosure, the lender will volunteer to refinance your mortgage. In this case, the financial difference between the two loans is wiped off. Why would he do such a generous thing for you?

Remember: the last person a lender’s doing this for is you. The process of foreclosure is incredibly costly and, as mentioned above, it is actually a financial loss for the lender, by no means a source of profit.

When foreclosure is initiated, you can stop paying your monthly instalments for a period of up to 12 months. That’s disastrous for the lender.

Does A Lender Have No Other Alternatives?

A lender has two other options, and these are not pleasant: a deed instead of a foreclosure or a forbearance agreement. The former can be less profitable than a genuine foreclosure. The latter is just an embargo anyway, so the lender would have to wait for the money.

A short refinance, as you can see, is the way to go for both the lender and the borrower. I think it’s pretty safe to say no one wants to let a bank continue with the foreclosure process. If your lender is empathic enough to present you this option, accept it.

You’ll be paying less interest, you’ll get rid of some of the debt (the difference), and you won’t lose your house. What more could you ask for when you risk living on the streets? Suing the bank won’t do you much help, either, because it’s obviously going to win.

Do Lenders Always Give People This Option?

No. Even if you propose this to them, they can decide against it. This will happen when foreclosure would make more financial sense to them. It’s cruel, that’s true, but banks are known for anything but their kind spirit when it comes to dollars.

All in all, it boils down to the total extent of the debt, as well as to the lender’s ability to understand why you could not stick to the repayment plan and default.

If you’re dealing with a good lender that actually wants to help you, make sure you listen very carefully, because you’re kind of a privileged person. This type of refinancing is handed out only when lenders want to do it.

The mere sound of the word “foreclosure” can cause goosebumps. Once the foreclosure is part of the conversation, you know you’re in some very serious trouble that can impact your entire life.

If you’re in this unfortunate position, ask about this refinancing method as quickly as you get the notice that informs of the foreclosure action. Don’t waste a single moment. If it so happens that the lender is unwilling to do this, ask about the alternatives.

Try to speak as much as possible about the fact that foreclosure would affect the both of you and that he could get his money back through this type of refinancing. For more info and financial help, contact Australian Lending Centre for a free consultation with one of our experts.

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Debt Consolidation

What to Choose: Debt Consolidation or Refinancing?

Debt consolidation vs. refinancing is an old skirmish on which people do not seem to have reached any consensus. Should I get a debt consolidation or should I refinance? The answers can differ according to what situation you are in.

First of all, refinancing and debt consolidation are two distinct notions with different outcomes, obviously. There are certain circumstances that warrant the use of these two tools. In the following, we’ll see when you should consider refinancing rather than debt consolidation and vice-versa.

Debt Consolidation vs. Refinancing

At first glance, refinancing and debt consolidation look pretty similar, but when you delve a little deeper, things are actually slightly different. The only similarity between them is that both are used for alleviating the burden of debt.

A debt consolidation loan will roll all your existing loans into just one with potentially better interest rates and a better term. However, debt consolidation is recommended when all of your loans have been taken from the bank. It is an easy way of getting rid of too many bills at the end of the month and re-establishing a repayment schedule.

Refinancing implies changing an existing loan with another one. Again, for the purpose of getting better interest rates. This is usually used when one is dissatisfied with the terms of his loan, be it a mortgage, car loan, personal loan or business loan.

different-loans

Debt Consolidation or Refinancing – When to Use Which

When you have multiple loans taken from a bank, you should consider debt consolidation. Private lenders can offer only personal loans, which have a lot fewer perks than their federal counterparts.

Moreover, you might not even be allowed to change a federal loan for a personal one, due to the policy of the bank you took your loan from. In such a circumstance, it does not really help to look for the perks of a debt consolidation or refinancing option.

Now, if you have a loan you’ve taken from a private lender to begin with, refinancing is the best idea. You can always look for better deals and change your loan if you’ve found another one with better stipulations, i.e. lower interest rates, tailored payday, longer term, etc.

Refinancing is also recommended when you have a reasonably small debt. In this case, it would make no sense at all to consolidate your debt. Debt consolidation should be used when your debt is huge, and the interest rates contribute to keeping it in place rather than dissolving it.

Using them Incorrectly

Now that we know what the advantages of using these financial services are, let’s take a closer look at what can happen if we use them incorrectly. Let’s start with the most popular financial service used by those who have multiple loans: debt consolidation.

Debt consolidation is a great service when used right, for example when your debt is massive, and you have a lot of loans with a high-interest rate that you need to repay. However, there is a chance that you can increase your debt by consolidating your credit card balances.

credit-card-balances

You can also lose your property if you get a debt consolidation mortgage and fail to make the payments on time. The lender has the right to foreclose your property and take it for good if you cannot pay the debt.

Refinancing can also be tricky if it’s used incorrectly. There are a lot of refinancing traps that will get you into deeper debt. Check the documents before signing them. Remember that when you refinance a loan, a lower interest rate is not the only thing you are after. Check for other taxes and fees that come with this new loan.

Also, dodgy lenders can present attractive refinance options only to get you to sign an agreement that will render you unable to make the repayments. Ask a financial expert about the document you are about to sign. He might save you a lot of money and stress in the long run.

Debt consolidation vs. refinancing is a great topic to discuss as long as you also look at the downside of each service.

You can find out more about debt consolidation and refinancing on the Internet or from financial experts.

Conclusion

Refinancing and debt consolidation are both really great tools for people in debt, but they’re not the same, and their outcomes are different. When you have multiple loans with exorbitant interest rates, debt consolidation is the way to go.

When you have just one personal loan (or any type of loan on their own), refinancing is the better choice. Therefore, there is no debt consolidation vs. refinancing winner carved in stone. It all depends on your situation.

More on the subject can be learned on www.australianlendingcentre.com.au. There you can read specialty literature on various financial topics, refinancing and debt consolidation inclusively.

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Refinance and Refinancing Self Employed

Guide: Refinancing for Self-Employed Aussies

Being self-employed means that you’re going to have to put in a little more effort into finding the right refinancing solution for you. That’s exactly why we’ve put together a self-employed refinancing guide to help you get a clearer picture of what you should pay attention to, how to choose a loan and most importantly, how to find the best option for your needs.

Self-employed borrowers encounter difficulties when they’re looking to refinance their loan. This happens because financial institutions will take a closer look at their income and are sceptical due to not knowing how their business is going to progress.

This refinancing guide will tell you how to start when you’re self-employed.

Talk to a Lender

Finding the right refinancing package relies on how much you earn. According to your income, you’ll know the amount you can borrow and the limit.

Without taking to time to assess the situation, you may end up disappointed, so start slow and talk to a lender that will be able to give you some points on how to proceed and what you should know.

Do the Math

The second part of this refinancing guide is to calculate exactly how much you’ve made in the last couple of years. Two years is usually the amount of time relevant when discussing self-employed people.

Go through your records and place all your receipts in order.

Fill the Paperwork

Get your paperwork in order by gathering financial statements, a notice of assessments and income tax returns. Unfortunately, having a successful business doesn’t get you a free pass on all of these.

Although it’s time-consuming, without the necessary papers, it would be harder to convince a lender that your business is doing well and you can afford to refinance.

Are You Really Self-Employed?

Many people confuse being self-employed with sub-contracting deals or being a contractor. Some lenders might think that as long as you work for others, you might pass as an employee, which could help you skip some steps involved in this refinancing guide.

Be Honest about Your Expenses

A new piece of equipment, a few more employees or a training course might have raised your expenses the last year. Don’t try to hide them from your lender and explain the situation. There’s always a solution, even though it may not be obvious to you just yet.

Adequate Taxable Income

Unfortunately, this is one of the hardest requirements for a self-employed person. Saying and proving that you can afford to refinance a loan are two different things.

An adequate taxable income is a sort of like your green pass when looking into refinancing. Try to get the necessary paperwork to also prove it.

This guide to refinancing for self-employed contains the significant steps that you’ll have to make to refinance your loan when you are self-employed. There are benefits and drawbacks when you work for yourself, but seek professional advice if you’re having doubts about how to proceed.

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Refinance and Refinancing

4 Important Considerations Before you Refinance Your Home

Are you planning to refinance your mortgage? If so, here are some important considerations to take into account before you refinance your home.

What is your purpose for refinancing?

Refinancing is a type of debt you will get. So, it is important to determine the whys and wherefores before securing it.

People often decide to refinance their mortgages because of the following reasons:

Lower the current interest rate.

Lowering your mortgage by two percentage points can make a noticeable difference in your portfolio. So, if the original mortgage rate is higher than your refinancing option and the monthly payment will be lower, then you might consider refinancing.

Pay for the closing costs of the original loan.

Homeowners who do not have the funds to bring to the closing table can transfer the closing costs of the initial loan to the new loan.

Invest into retirement.

Homeowners who are nearing g retirement can take advantage of short-term refinance mortgages. They can use the proceeds of the loan to invest in a diversified portfolio. While it is not advisable for those who largely depend on the market for retirement income, retirees with a steady flow of income and large pension don’t have to worry. After all, increasing the number of your finances can help you generate growth even after retirement.

Other viable reasons include managing your credit to improve your credit scores, changing loan type, shortening loan term, and getting cash for home improvement. You can also access the equity in your home to cover important personal expenses and deal with life-changing events such as a wedding, divorce, sickness and financial losses. Refinancing is also a good option for those who plan to consolidate their debts and use cash-out refinance to pay for credit card debts with high interest.

In short, refinancing is a good option for people who need instant cash, and those who want to get out of debt fast, reduce their loan payments, strengthen their portfolio and invest into the future.

How long will you stay in your house?

If you don’t see yourself staying in your property for the next 15-years, or so, when your loan term is longer, then refinancing may be a costly choice for you. Aside from the fact that you cannot move anytime soon, the closing costs would outweigh the savings you accumulated from refinancing your mortgage.

What is the value of your home?

The cash you can get and the interest rate depends on your home’s value. Talk to a licensed appraiser to determine the value of your home, so you can decide whether or not you can make some improvements to increase its value and the chance of getting refinanced.

What are your options?

While traditional financial institutions offer refinancing products, an experienced and highly reliable alternative lender like Australian Lending Centre can help you find the most suitable loan products, based on your needs.

You can talk to our refinance specialists to get the best interest rates, regardless of your credit history and financial standing.

Contact us today and we will do our best to help you refinance your home loan.

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Refinance and Refinancing

Refinancing Analysed: Pros and Cons

Refinancing can be a convenient option in many cases, regardless if you are hoping to get a better interest rate or attempting to consolidate your existing debts. However, it can prove to be pretty tricky in the long run, which is why you may want to learn everything about the refinancing pros and cons.

This option may be perfect for one borrower and a disaster to another. This is why you need to do your homework and read the points below before switching to another loan system.

When Refinancing is Beneficial

When it comes to refinancing pros and cons, there are definitely some benefits you can reap by making the switch. Here are the main ones:

  • Getting Access to Equity – You can use the equity you collected in your loan for other things such as investing, renovating, buying a new car or going on a vacation.
  • Getting a Better Rate – You can get a better interest rate by refinancing, which means that your payments will also be lower. This could, in turn, save you a lot of money.
  • Increase Your Mortgage Length – By increasing the length of your payment, you will have a smaller monthly fee. However, you may end up with a higher interest, causing you to pay more in the long run.
  • Decrease Your Mortgage Length – The same can apply in reverse if you reduce the mortgage length. Not only will you get rid of the debt sooner, but you will also pay less in interest than before.
  • Eliminate Fees – You can sometimes get out of paying certain fees by refinancing a loan. If your current loan has built-in fees for additional features that you may no longer need, a refinance may help you get rid of some of these charges.

Refinancing can be a great way to make your payments easier, but you need to be aware of all the refinancing pros and cons before proceeding.

The Drawbacks of Refinancing

Just as there are refinancing pros, there are also particular cons. When checking out refinancing pros and cons, here are the few risks that you need to keep in mind.

  • Lender’s Mortgage Insurance – Whenever you get a loan, you need to pay insurance to the lender. If you change your lender, it means that you may have to pay that insurance again, even if you already paid it before. This may undercut most of the savings you hoped to get with the refinancing.
  • Longer Loan Duration – Refinancing means that you may have to pay for longer than you originally had to. This might put a damper on your plans if you had the intention to move out.
  • Extra fees – You may be required to pay certain exit fees from your own pocket, and these aren’t exactly cheap. Plus, you may be forced to pay even more entry fees upon refinancing.

Refinancing can be a great way to save some money due to its benefits. However, depending on the circumstance, this process may get you paying more than you should have if you are not careful enough. Keep in mind all these refinancing pros and cons before deciding.

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Refinance and Refinancing

Why Should You Consider Refinancing Your Home Loan?

People take a home loan refinancing into consideration when they’re no longer satisfied with their actual home loan or when they want to make some house renovations.

Refinancing becomes a choice when your lending needs have changed or when your home loan is starting to pose difficulties.

  1. Home Loan Refinancing has lower interests rates

This is the main reason why Australians take into consideration refinancing their mortgage. The easiest way to figure out if it’s worth the trouble to switch your home loan is to calculate if the costs of the refinancing will be paid off in the next two years.

Interest rates and fees can build up, so don’t just look at the lower interest rate that comes with refinancing. Take into consideration all the fees implied in the process.

  1. It’s more compatible with your renovation project

Home loan refinancing brings benefits to homeowners who desire to invest in structural renovations that aren’t compatible with personal loans.

Refinancing allows you to use the equity in your property as collateral. This is an option only if the value of the house outpasses the cost of renovations.

Some home loans don’t offer the option for a construction loan, so you may just have to go into refinancing in order to find one that fits your needs.

  1. Consolidating debts is a good option

Home loan interests rates are lower, and this is why many people add their personal loan or car loan to their mortgage. Dividing the payments over the course of the next 25 to 30 years will ensure much smaller monthly payments, but raise the interest rates.

You could benefit from this option of refinancing if discipline and regular payments are something that you’re used to. You could add a personal loan to your house loan, but instead of paying it off for 25-30 years, choose to pay it over the course of the next five years. This will allow you to sort your personal debt faster and even save almost 75% of the interest rate that you would have spent by prolonging the payments to suit your house loan.

  1. Refinancing offers flexibility

If you’ve come to the point where a fixed rate isn’t your best alternative, and you want and actually can pay out the loan faster, then home loan refinancing is an alternative. Being able to pay according to your income will get you out of debt faster, and it also comes with the split facility, a redraw facility, and an offset account.

  1. When mortgage payments are too big

Sometimes, our finances can’t support the mortgage payments and we’re forced to look for an alternative that requires a smaller amount per month. Even though the interest rates could go higher, there are times when our budget isn’t able to cover the payments, so refinancing is in order.

Home loan refinancing comes with advantages and disadvantages, so before taking the step, see if it will suit your needs!

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Refinance and Refinancing

Home Owners Struggle – Time to Refinance

Australian home owners are predicted to spend the remainder of 2010 forking out 50% of their income on debt repayments.

A recent study shows that more than 40% of Aussies spend about half of their monthly income on repaying home loans, credit cards and/or personal loans.  This survey also indicates that many Australians have little cash left over to play with at the end of the month – which only goes to show that every time the Reserve Bank of Australian (RBA) and major banks increase interest rates, a majority of home owners struggle further.

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Refinance and Refinancing

Now is the Time to Refinance

After the RBA’s decision this week not to increase interest rates at present – home owners should consider refinancing right now.

Refinancing your home loan can allow you to access cheaper interest rates or even unlock the equity in your home to renovate, buy an investment property or consolidate debt.

Some of the advantages of refinancing a loan include:

  • Lower monthly repayments when you refinance
  • The ability to pay off multiple debts through refinancing schemes
  • Reduced risk by changing from a variable rate to a fixed rate when you refinance
  • Access to cash to cover major expenses when you refinance
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Refinance and Refinancing

Home Loan Stress from Interest Rates Hike

As some of the big banks have raised their interest rates higher than the Reserve Bank, many Australians are looking for a way to defuse their mortgage stress.

By refusing to pass on all interest-rate reductions, inflating the Reserve Bank’s increases or adding hikes of their own, the banks have widened the gap between the cash rate and their key interest rates by as much as 1%.

If you’re struggling with home loan repayments you may want to consider refinancing your home loan. Refinancing can allow you to access cheaper interest rates or even unlock the equity in your home to renovate, buy an investment property or consolidate debt. The Australian Lending Centre has years of experience helping people to refinance to achieve these goals.

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Interest Rates

Interest Rates On Hold For One More Month

More good news for the consumers of Australia as we move into the third month of the year! The Reserve Bank of Australia (RBA) met yesterday to discuss the interest rates in their monthly board meeting.

In the early afternoon, a statement was released stating for the rates would stay firm at the current cash rate of 4.75%. As this decision did not come as a shock to the majority of the market, it is a relief and gives consumers another month of breathing space. This decision was hinged on various situations including the high exchange rate, strong competition in the market, consistent inflation and a strong national income.

Many industry professionals have observed that the next interest rate move will probably occur in the third quarter of the year. August seems to be on the top of economists as the month to be prepared for change, though they do say it could come as early as May.

For consumers this means we have a few more months of low rates before another hike increases interest on credit cards and more importantly, mortgages. Now is a great time to think about refinancing your current home loan in order to lock in a lower rate while possibly unlocking some of the equity in your home to free up some cash.

Refinancing allows you to pay out your current home loan and use additional equity in your home to fund a holiday or renovations. This product also allows you to change your current mortgage provider or the features locked in to your home loan.

Throughout the life of a home loan, it is not unusual to change providers or products due to the fact that life situations change which means there could always be a better home loan out their for you.

Avoid trying to find the best home loan and lowest rate yourself and give Australian Lending Centre a call, as we have already done the hard work for you. Call us on 1300 138 188 to discuss your home loan option with a refinance consultant. Alternatively, fill out the enquiry form on the right and a refinance consultant will contact you shortly.

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Refinance and Refinancing Home Loans

Advantages of Refinancing

Refinancing refers to the process of paying off your current loan with a second loan.  If the timing is right for you, refinancing can be a very beneficial exercise and may ultimately save you thousands. Learn the advantages of refinancing here.

When is the best time to refinance your mortgage?

Refinancing your mortgage works best when the interest rates are low.  If they aren’t lower than your current rate, then refinancing is probably not worth your while.  The idea of refinancing your home loan is for the likelihood that the monthly repayment amount will be reduced noticeably resulting in a considerably lower home loan repayment in the long-term.

How do you measure costs and advantages of refinancing my home loan?

There are advantages and disadvantages to refinancing your home loan.  The idea is to understand what you’re in for with your particular situation.  For some people, the best method when considering whether to refinance is a simple comparison.

Compare all the costs of your current home loan to the new loan over a future period.  Since the loan period may vary according to how steadfast your repayments are, just make the best guess as to how long you will have the new home loan.  If the total costs are going to be lower with the home loan, then you should refinance.

How much are you able to borrow by refinancing your home loan?

Most lenders will consider the following four aspects when assessing your home loan refinance application.

  1. Your ability to pay. It is important that you have a regular income.
  2. Your credit history.
  3. All other monetary obligations. It is important for a lender to understand your current financial commitments so that they can determine if refinancing is going to be the best option for you.
  4. The value of your property.  This is usually in the case of home equity loans.

The advantages of refinancing are astonishing, provided that the situation is right for a home loan to refinance.  What makes it stand out is the fact that it can cost you less compared to most loans and refinancing can be very effective to consolidate high-interest debts.

If you would like to speak with a consultant to find out if refinancing is the best option for you, please call 1300 138 188 today, alternatively fill out an enquiry form on the right and a consultant will contact you shortly for a free appraisal.