What is the difference between consolidating and refinancing
If Sally has loans, A, B, and C with three different companies, she may consolidate them into a single loan with a new lender.She still owes the same amount of money, but has a new lender with new terms. At times lenders will refer to a refinance as paying off one old loan with one new loan, and a consolidation as paying off multiple old loans with one big new loan.Understanding the difference between student loan refinancing and student loan consolidation comes down mainly to wrapping your mind around to slightly different definitions. These two processes sound similar, but they are very distinct.
This is especially true when borrowers have multiple loans.
In return, you agree to pay off a new loan with the new lender.
Borrowers typically go this route to secure a lower interest rate.
When you refinance a loan, it typically means that you are taking your business from an old lender to a new lender.
As part of the refinance process, your new lender pays off your old loan entirely.