So, you survived getting a home or car loan a little shaken, but unscarred. Now you can make loan payments every month knowing that your home and car are financed under the best possible terms—saving you aggravation and money. Right? Not really. Improved credit scores and lower available interest rates can dramatically lower not only your payments, but your interest as well. If you are interested in refinancing to lower your bills or interest rates, become as informed as possible before you determine if it is the right choice.

Car Loan Refinancing

Refinancing cars is a little different than home refinancing in that your car only depreciates in value the longer you own it. Put simply, every day you own your car, your car loses value. In addition, most of your interest on a car loan is paid towards the beginning of the loan. These factors can make refinancing cars a little trickier than home refinancing. However, car loan refinancing can still save money; you just have to do it earlier rather than later. Here’s another good reason to refinance early: car loans have to be refinanced for at least $7500, so if you owe less than that, the lender isn’t likely to refinance you.

If you owe more than $7500 on your car, shop around online, at banks, and at credit unions to find a lower interest rate. Even a drop of 1% in interest can save thousands of dollars, making car loan refinancing a good choice.

Home Loan Refinancing

Home loan refinancing is different than car loan refinancing in that borrowers have a wide spectrum of reasons for doing it. For example, if you refinance your car, you are doing it to save money. However, home owners often refinance to consolidate debts, pay off credit cards, or get rid of high-pressure debt collectors. While home loan refinancing can offer a great way to eliminate these debts, keep in mind that your home is collateral. Put simply, if the possibility of losing your home over credit card debt is a worthwhile risk to you, then home loan refinancing might be a good choice.

Just remember to choose a refinancing loan that offers lower interest than your existing one, and make sure to calculate worst-case-scenario payments if you opt for a variable rate loan. Also, understanding what closing costs and fees will be incurred on your new loan should be vital in your decision-making process. Remember, lending institutions can charge thousands of dollars in fees and closing costs, making refinancing a bad choice in some cases.

No matter what type of refinancing you decide to take on, make sure to shop around and compare rates and terms. Doing so will ensure that your refinancing decisions are informed ones—and will ensure that refinancing really is the right choice for you.