Refinancing Risk

Refinancing risk means the risk that a borrower may not be able to replace old debt with new debt on acceptable terms. In simple terms, it is the danger of having to refinance when borrowing is difficult or expensive. Refinancing risk is important because companies, governments, and households often need to renew debt when it matures. If interest rates are higher or lenders are cautious, refinancing can become costly. For example, a company with debt maturing soon may face refinancing risk if credit markets tighten. Refinancing risk is not the same as default. It can lead to default if the borrower cannot refinance or repay, but it is a risk before that point.