Loan refinancing is the process of replacing an existing loan with a new loan with more favorable terms. This may include reducing the interest rate, extending the repayment period or changing the type of loan.

The best time to refinance a loan depends on several factors, such as current interest rates, length of loan repayment and current financial situation. It is usually recommended to refinance a loan when interest rates drop by at least 0.5%-1% compared to the existing loan.

The interest rate is usually determined based on market conditions, i.e. supply and demand for loans. A bank or other lender takes into account factors such as risk, inflation, currency exchange rates and other factors to determine the interest rate.