Consolidating a loan definition
But you might not have the funds available a large lump-sum payment.
In those cases, it might make sense to refinance the loan—using a new loan to fund the balloon payment—and take more time to pay off the debt. Especially with loans like home loans, you’ll pay closing costs which can add up to thousands of dollars.
A lower interest rate (with all other things staying the same) can also lead to lower monthly payments.
Save money: A common reason for refinancing is to save money on interest costs.Consolidate debts: If you have multiple loans, it might make sense to consolidate those loans into one single loan—especially if you can get a lower interest rate.