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Refinancing

What is Refinancing? Refinancing = Automatic Better Deal

Section titled “What is Refinancing? Refinancing = Automatic Better Deal”

Refinancing lets any lender take over your existing loan by offering significantly better terms. You don’t need to do anything - if someone offers better terms that meet the requirements, your loan automatically improves.

Key Point: Unlike renegotiation (which requires your approval), refinancing happens automatically because it only allows strictly better terms for you.

How Refinancing Works

Section titled “How Refinancing Works”
  1. Any lender can refinance your active loan (during allowed periods)
  2. New lender must offer at least 10% better APR (20% → 18% or better)
  3. New lender fronts payment - pays original lender full principal + all accrued interest to date
  4. Automatic switch - your loan terms improve instantly, no action needed
  5. You repay everything - when you repay, the new lender gets back what they fronted plus their own accrued interest

Important: The new lender doesn’t lose the interest they pay to the original lender - you’ll repay them that amount plus their own interest when the loan matures.

Refinancing Requirements

Section titled “Refinancing Requirements”

APR Improvement: Must be at least 10% better than current rate

  • Example: 20% APR → must improve to 18% APR or lower

Principal: Can be increased (you get the extra amount) but cannot be decreased

Due Date: Can be extended but cannot be shortened

Tranches: In GONDI V3, individual tranches can be refinanced separately

Refinancing Lock-ups

Section titled “Refinancing Lock-ups”

When you CAN’T refinance:

  • First 15% of remaining loan duration
  • Last 15% of remaining loan duration

Loans funded by a Private Offer can never be refinanced, at any point in the loan. The lender disabled refinancing when creating the offer — see Offer Options. The borrower can still repay, or renegotiate out by accepting a new offer.

Lock-up resets: Each time your loan gets refinanced, the 15% lock-up periods restart based on the remaining duration.

Example:

  • Original loan: 30 days
  • Lock-up periods: First 4.5 days and last 4.5 days
  • If refinanced on day 10: New lock-up for 15% of remaining 20 days = 3 days

Refinancing Example

Section titled “Refinancing Example”

Original Loan (April 1st):

  • Principal: 10 WETH
  • APR: 20%
  • Due: April 30th (30 days)

Refinanced (April 10th):

  • Principal: 10 WETH (same)
  • APR: 20% → 14% (30% improvement ✓)
  • Due: April 30th (same)

What happens:

  • New lender fronts payment to original lender: 10 WETH + 0.0548 WETH interest (10 days at 20%)
  • Your loan now accrues at 14% instead of 20%
  • You save money automatically

Final repayment (April 20th):

  • You pay total: 10 WETH principal + 0.0931 WETH interest
  • Interest breakdown:
    • 0.0548 WETH: Repays what new lender fronted to original lender
    • 0.0383 WETH: New interest owed to new lender (10 days at 14%)
  • Result: Original lender gets 0.0548 WETH, new lender gets 0.0383 WETH + gets back their 0.0548 WETH advance