Billig Refinansiering – What is Debt Refinancing and How Does it Work?

Waseem Jalal

Many people are in debt for various reasons, including debts incurred through school loans and other emergencies. Most people in debt will have difficulty repaying the money, even if they work for years, because of inflation and other financial factors. Consequently, they remain in a vicious financial cycle that does not favor them, especially if they need different loans. 

However, it does not have to be impossible if they can find cheap refinancing, low-interest loans. The primary benefit of such loans is the favorable interest rate. Interest is one of the deciding factors whether or not a debt will be a burden to repay in the future. Some interest rates are steep and unfavorable, constantly increasing the repayment sum as time passes. 

Over time, the final sum appears to be twice the initial loan amount, usually because of the interest. If you can find a cheap loan with low interest, you can use it to replace the unfavorable one.

What Is Debt Refinancing?


It is a system that allows you to replace one debt with another with favorable terms. Simply put, debt refinancing enables you to take a debt with favorable terms in place of an old one with unfavorable terms and interest. Check out this resource,, for a better understanding of how it works, especially if you live in Norway. You will also find institutions with low interest and a breakdown of the payment structure.

For example, you take a mortgage and have $100,000 left to repay within ten years at 7%. You must pay $1,161.08 monthly, as your total repayment sum is $139,330.18 unless the bank or mortgage institution reduces the interest with the new one. Suppose they reduce it to 4%. That means your new total repayment sum will be $121,494.17 with a monthly payment of $1,012.45.

This system is not to be confused with debt restructuring. Debt restructuring allows an individual, company, nation, or country with financial and liquidity problems to renegotiate the terms of loans to get more favorable terms, particularly concerning interests.

In other words, it does not involve replacing an old debt with a new one but rather renegotiating or changing existing terms. People or companies facing bankruptcy can use debt restructuring to stand on their feet and remain in business.

How Does Debt Refinancing Work?


The process is simple; it means taking from B to pay A the money you owe. You already have a debt that seems too challenging to repay, primarily because of the interest and accruing charges. As time passes, the amount increases and monthly payments do not significantly affect the total amount payable. Refinancing the debt by replacing it with a new one with cheap interest is the best option to avoid tanking your credit rating and going into bankruptcy.

Apart from reducing the interest, debt refinancing also helps you switch from a fixed-rate debt to a variable-rate debt and vice versa, depending on the favorable one. A variable-rate debt is one where the interest rate resets periodically at pre-determined times, that is, annually, monthly, weekly, or daily. Refinancing also helps to lower the monthly payments since you get a new loan with better terms to service the old one. 

There are a few downsides to consider before opting to refinance an old and difficult one.  One downside is the possibility of paying a penalty for refinancing a debt. That means the lender will require payment if you want to switch to a new loan, especially when going with a new lender. 

Sometimes, it may not be a penalty but fees that come with refinancing. When considering debt refinancing, consider possible hidden charges or penalties and how they may affect the overall costs. Click here to learn more about refinancing.


How to Find Cheap Refinancing Institutions

Knowing how to refinance your debt is not enough; you must also research and find the best companies or institutions to offer favorable loans. Banks are your best bet, but how do you get the best deal? Let’s discuss a few determining factors to get you started.

  1. Repay Debts with High Interests

Repaying small debts with significant interest may seem counterproductive, but it may benefit you. If you have several debts, pick a small one and repay the total sum, including interest, within a short period. Banks typically carry out credit checks on all potential borrowers, and they use that opportunity to determine credit scores and repayment willingness. 

Prompt payments, regardless of how little, positively reflect on your credit history and make banks more open to offering new loans. In other words, if you have a history of repaying loans, you increase your chances of getting a debt refinance.

  1. Apply to Several Banks

As mentioned, there is no specific way to know which bank best suits your loan needs. While you may get several recommendations, settling for one can be challenging. Your best bet is to apply to multiple banks and get feedback to help you decide which to go with. 

Use all the necessary details, including name, phone number, and email address. Remember to apply with the same amount and repayment terms to get similar offers. Doing this ensures you get many offers and can easily compare the offers using the same parameters before settling on the best option.

  1. Regularly Check for Better Offers

While you may get offers from several banks for debt refinancing with low interest, keep an eye out for better offers. Applying for new loans to replace the old ones is free, and nothing says you cannot apply for new ones within a short period of approval. This is especially useful if your debt runs into years.

Since interest rates fluctuate and change occasionally, you must find the best offers to reduce the interest and overall payments as much as possible. Review the application and reuse it for multiple banks, looking for those with favorable terms. If there are no improvements in the available terms and interest, stay with the current loan contract.

  1. Get a Co-Applicant

One way to reduce the burden of repaying a debt is to get a co-applicant. Before applying for refinancing, get a loved one – a spouse or friend – who can sign as a co-applicant on the contract. Banks allow such applications and may even be favorably disposed to them because it means you can better repay the loan. It is not common, but it increases the chances of finding the best bank for your refinancing needs and getting quick approvals. 

Ensure you find someone with the resources or income to improve your chances of getting a loan. They must also be willing to sign the same contract. The higher their credit scores, the better your chances.

5. Verify Your Credit History

You do not have to wait for a lender to disclose your credit history. Credit rating agencies are accessible and can quickly help you verify your rating. That way, you can tell your chances of getting a loan approval. The official rating is also accessible online, and you can check to see how your rating affects loan interest. The lower the score, the higher the interest because lenders are not favorably disposed to low scores or bad credit. 

However, higher scores attract better interest because the scores reflect the owner’s ability to service loans. Note that quick loan repayments boost your scores; the faster you repay what you owe, the better your scores become. Therefore, repay as much as you can before applying for debt refinancing.

It is crucial to note that the average interest rate across all lending institutions typically affects loan interest. In other words, banks will only offer you what is generally applicable, even if you need the lowest rates. Also, banks will not lend loan sums above an individual’s repayment capacity. So, if you want a new loan to replace an old one, ensure the two amounts are the same or close. 

Otherwise, it would be futile if the new amount cannot service the old one, which directly affects the interest. The good news is that anyone can access these loans, regardless of income level or credit rating, as long as they have a stable income source. In addition, keep the loan period as short as possible; the shorter the term, the lower the interest. Long-term loans usually attract high interest because the borrower has a longer time to repay the loan sum.



Debt refinancing can keep your finances intact by allowing you to access a new loan to replace the old one. The new loan must have a lower interest rate to be beneficial. Remember to apply to as many banks as possible, keep the repayment period short, and service a few old debts to boost your credit score and improve your chances of approval. The quicker you pay the money back, the firmer your credit rating will be, and interest will be lower when borrowing in the future.

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