A loan (debt) can be refinanced for various reasons:
to take advantage of a better interest rate (which will result in either a reduced monthly payment or a reduced term);
to consolidate other debt(s) into one loan(this will result in a longer term);
to reduce the monthly repayment amount (this will result in a longer term)
to reduce or alter risk (e.g. changing from a variable-rate to a fixed-rate loan)
to free up cash (this will result in a longer term).
Refinancing for reasons 2, 3 and 5 is usually undertaken by borrowers who are in financial difficulties, to reduce their monthly repayment obligations - with the penalty that they will remain in debt for years longer.
In the context of personal (as opposed to corporate) finance, refinancing multiple debts makes management of the debt easier. If high-interest debt such as credit card debt is consolidated into the home mortgage, the borrower is able to pay off the remaining debt at mortgage rates over a longer period.
For home mortgages, in the United States, there may be tax advantages available with refinancing, particularly if one does not pay
