What is Refinancing?
Loan '''refinancing''' means taking out a new [[loan]] to pay off one or more outstanding loans. Borrowers usually do this to get lower [[Interest rate|interest rates]] or to otherwise reduce their repayments. It can also reduce or alter risk by switching between a variable-rate and a fixed-rate loan. Refinancing can be used to get a longer term loan with lower monthly payments. In these cases, the total amount paid will increase, as interest will have to be paid for a longer period of time. Some fixed-term loans have penalty clauses - a charge for early repayment of the loan, in part or in full. There are normally [[Transaction cost|transaction]] fees on the refinancing.<ref>{{Cite web|date=2012-11-19|title=4 Types of Loans You Can Refinance|url=https://www.themuse.com/advice/4-types-of-loans-you-can-refinance|access-date=2023-11-20|website=The Muse|language=en}}</ref> Refinancing also means providing a [[central bank]] of commercial banks with additional reserves on a credit basis, such as borrowed reserves. The initiators of refinancing are commercial banks. They turn to the central bank when they cannot replenish their reserves from other sources. ==References== {{reflist}} [[Category:Accounting]]