i understand people do it for lower interest rates but how does that benefit the bank/company?
In: Economics
Refinancing means taking out a new loan to repay the old loan.
Banks charge fees to do this. Typically thousands of dollars to process and approve a new loan. Many banks and nearly all small banks don’t make money from interest on loans. Most of the money they make is on loan fees and charges.
And banks are generally in a competitive market – if they don’t refinance loans, another bank will. Even if the original loan is with Bank A, Bank A will typically still agree to refinance the loan because they know that Bank B is just around the corner.
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