Refinancing means paying off one or more old debts by getting a new loan from a new or existing lender. Sometimes, refinancing is an appropriate way to resolve financial problems. In many situations, however, refinancing can make existing financial problems worse.

DO compare the cost of refinancing with the cost of your existing loans. Federal "Truth in Lending" laws require that lenders give you certain uniform disclosures containing the annual interest rate you are charged, the total finance charge, the amount financed, and other costs. You must consider all costs involved in refinancing to compare apples to apples when choosing a lender. Don't just compare interest rates. Compare all costs.

DO refinance your higher interest rate unsecured loans with lower interest rate unsecured loans if the terms of the loans are comparable. Do be certain that the new rate that you will be paying will actually remain lower than your existing rate, and that it is not a "teaser" rate (one that will go up after an introductory period).

DO refinance your secured debts (such as your mortgage or car loan) if the new loan is for the same length of time left on your old loan (or shorter), and the interest rate on the new loan is lower than the interest rate on your existing loan. The interest rate on the new loan usually must be substantially lower than the interest rate on the old loan to make up for costs and fees associated with the new loan.

DO consider refinancing your home to pay-off car loans or credit cards, but only if you are not in financial difficulty and not at risk of losing your home, and only if refinancing is beneficial from a tax standpoint.

DO watch out for refinancing "scams." If you get unsolicited offers to consolidate all of your loans into one mortgage, to sell your home with an option to buy it back, or to save your home from foreclosure, beware! If an offer sounds too good to be true, it probably is.