---
title: "Refinancing: definition | Desert Rock Capital"
url: "https://www.desertrockcapital.com/glossary/refinancing"
description: "Refinancing is replacing an existing loan with a new one, commonly to change the rate, the term, or the payment."
---

Loan structure

# Refinancing
All lending terms
Definition

Refinancing is replacing an existing loan with a new one, commonly to change the rate, the term, or the payment. The new loan pays off the old one, and you repay the new loan going forward.

Refinancing substitutes a new loan for an existing one, with the proceeds of the new loan used to pay off the prior balance. People refinance for reasons such as obtaining a different interest rate, lengthening or shortening the term, moving from a variable rate to a fixed rate, or changing the monthly payment. Refinancing can involve closing costs or fees, so the overall effect depends on the new terms compared with the old loan, including the rate, the term, and the total cost over time. It is common with mortgages, auto loans, student loans, and personal loans. A related concept is consolidation, which combines several balances into one.

Source: [Wikipedia](https://en.wikipedia.org/wiki/Refinancing). This definition is general educational information, not legal or financial advice.
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