Situations arise when the borrower needs to re-take a loan in order for them to repay the previous one. This can happen for 2 reasons: more favorable conditions or the impossibility of otherwise fulfilling their duties.
How to take out a loan to pay off another loan
If the client previously paid regularly and on time, then it will not be difficult for him to take a new loan. Most often, the Bank will request a package consisting of the following documents:
- Passport.
- Certificate of income.
- Certificate of the remaining debt on the previous loan.
- Documents confirming the encumbrance of the property.
- Details to which funds will be transferred.
To begin with, you will need to visit a bank branch where there is a credit department and fill out an application for receiving funds. Further, the credit institution will consider the application for some time, and after making a decision, you should expect a call from a specialist. If the bank decides to respond positively to the application, then the funds will be transferred to the specified account and a payment schedule for the new loan will be issued.
As a rule, banks offer the transfer of funds by non-cash form of payment, but in some cases it is allowed to issue money to the client in cash. But in this case, the user will not be able to spend money on any personal goals. First, it will lead to even greater financial hardship. Secondly, most often, after a while, the bank will request documents confirming that the old loan or loans have been closed. If the borrower of funds for some reason is unable to provide the requested documents, then the bank has the right to apply penalties in accordance with the agreement.
When is it profitable to take a new loan?
As a result of the fact that banks are always trying to attract more and more new customers, you can see lucrative offers for refinancing old loans. Thus, the individual and the bank receive benefits. The borrower has a new loan agreement with better conditions, and the bank has a new client.
It is worth noting that the bank is most often looking for new borrowers among those who have regularly repaid the loan and have a good history.
The most common service offered by the bank is the ability to combine several loans into one. For the user, such a merger has visible advantages: there is no need to control when and what payments must be paid. Also, the travel time to the branches of different banks is significantly reduced.
It is beneficial to get a new loan to pay for the old one if the borrower understands that he cannot afford the monthly payment specified in the old agreement. Then a new loan can be taken with a lower monthly installment for a longer period.
But before taking a new loan, you need to make sure that it will really be profitable. To begin with, it is worth calculating all the mandatory registration costs:
- Transfer fee.
- Insurance.
- Assessment.
In some cases, all the anticipated benefits may be offset by the additional costs. And the profitability of getting a new loan will disappear.
Most often, getting a new loan to pay off the old one is profitable if the following factors are present:
- Long-term loan.
- The old loan has not yet passed half of its validity period.
- The difference in interest is more than 2. This condition loses its properties if the old loan was taken in foreign currency, and the new one must be taken in rubles.
