Consumer Watch: When to refinances and when to reconsider

Refinancing large purchases can be beneficial depending on your goal (KOKH).

Refinancing major purchases could make financial situations better, but being too eager could leave you worse off. Financial specialists say you can refinance just about any kind of loan. Sometimes it's worth it, other times less so. The answer depends on your specific situation

If you refinance you'll still have the debt, but a major benefit is lowering the interest rate.

“If you lower your interest rate you are suddenly lowering the overall cost of that loan, and the less that loan costs you the quicker you can pay off the house, the less you have to pay each month,” says Justin Cupler, a savings expert at The Penny Hoarder.

Ask yourself how much lower that interest rate can get. For homeowners with adjustable rate mortgages, the interest might have been great initially, let’s say 2.9 percent, but years later it's too high, maybe 5.9 percent. Cupler says in this case a consumer might look into a fixed rate mortgage at a rate that is less overwhelming.

Refinancing is not always a plus in the long run. Consumers might want to refinance to lower monthly payments. Cupler says this will likely mean extending the loan-- meaning you will pay more in the long run in interest.

“By stretching out those terms you are also reducing your monthly payment and that can free up some liquid cash for you should you need to do things like cover some bills. You have an unexpected medical expense, things like that,” says Cupler.

Trying to refinance a car is a difficult task because of how quickly they depreciate, but here is a handy tip for future car buying decisions: It is easier to refinance a used car verses a new car because the depreciation is not as sharp.

Cupler also says that people can try finding a personal loan in an attempt to refinance federal student loans, but it's unlikely you'll find an interest rate better than the one the government has given you.

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