How to Refinance a Line of Credit

by John Hewitt ; Updated July 27, 2017

Refinancing a line of credit can be simple or challenging depending on your personal credit rating. Most lines of credit often have a variable interest rate, so taking out a second loan to refinance it may be an ideal financial choice if the lender adjusts the interest rate on the original line of credit upwards. If there is sufficient income to pay back the second loan on time or early, refinancing can save substantial amounts of money in interest payments.

Step 1

Read your line of credit agreement with your lender carefully. Lines of credit usually have a draw-down period that lasts for a certain period that has a low rate of interest. After this elapses, no more money can be borrowed from the line of credit, and it must be paid back. If the interest rate is adjustable, note the upper boundaries of it so you will be able to better plan your refinancing.

Step 2

Compare interest rates offered by multiple lenders for your refinancing. In some cases, the lender you have the original line of credit with will give you a deal on the interest rate if you remain with it for the refinancing.

Step 3

Develop a payment plan for the refinancing loan before you take it out. This is particularly important if you plan to draw down on the line of credit once again as soon as you are able. It is risky to use refinancing to enable taking on more debt rather than using it to reduce overall debt burden.

Step 4

Contract with a reputable lender to refinance your loan. Common methods for refinancing lines of credit include taking on a second mortgage. Partially secured loans can provide superior interest rates, particularly for people with weaker credit. Personal loans can serve as excellent refinancing tools for people with good to excellent credit.

About the Author

John Hewitt began freelancing in 2008, writing about subjects ranging from music to stock trading, the energy industry and business. His ghostwritten work has appeared all over the Web. He attended New York University, pursuing a bachelor's degree in history.