Question

Which borrower option is an example of refinancing?

[] Replacing an old student loan with a new student loan that has a lower interest rate
[] Paying the outstanding interest on an open-ended loan
[] Changing payment terms on a mortgage from five years to 10 years
[] Agreeing to a higher interest rate on a personal loan in exchange for lower fees
[] Raising the monthly payment amount on a student loan

Answer 1

Refinancing refers to replacing an existing loan with a new loan featuring better terms, commonly a lower interest rate. This is exemplified by replacing an old student loan with a new one at a lower rate, leading to financial savings or quicker loan repayment.

Step-by-step explanation:

The borrower option that is an example of refinancing is replacing an old student loan with a new student loan that has a lower interest rate. This is because refinancing involves taking out a new loan to pay off one or more existing debts, and typically, the new loan has more favorable terms, such as a lower interest rate. Refinancing can lead to lower monthly payments, reduced overall interest costs, or a faster payoff of the loan.