So I got a car recently, and the dealer and my parents agree that refinancing will be a good idea soon. How does it make sense for another creditor to buy your credit and give you a better rate? Why would the original creditor not just keep you on the hook for the worse rate?
In: Economics
Lender 1 gets paid in full without risk after hav8ng extracted origination fees for the new loan. They can turn around and lend that money to someone else, extracting more fees from the new borrower and then having interest paid to them.
Lender 2 gets origination fees, a new customer, collateral, and interest payments.
You get a more favorable payment term that hopefully saves you more than the origination fees on the new loan.
Latest Answers