There are a lot of situations when a new loan may be required to repay an old one, and therefore today many banks offer their clients to repay debt to financial institutions on very favorable terms.
In order not to spoil your credit history and get out of the difficult situation of repaying the previous overdue loan, you can arrange a new, cheaper loan.
Today, refinancing or on-lending is a common way of lowering the loan rate, increasing the maturity, reducing the amount of payments, changing the currency, as well as issuing one loan instead of several.
There are banks that offer consumer loans in cash or non-cash, which can be used for their own purposes, for example, for a mortgage or car loan, including to repay a previously taken loan from another bank.
But refinancing a loan has its own difficulties. It should be borne in mind that the bank chosen to pay off your debt will re-evaluate your solvency. A package of documents is required. If you urgently needed funds and you took an instant loan, for which only a passport was required, then for a new loan you may also need an income statement and a guarantor. And also a certificate of the amount of credit debt, taken from the bank where the loan was originally opened.
For refinancing a loan, the usual parameters are considered, as for obtaining a regular consumer loan. Work experience must be at least six months or a year at the last job. The required salary level varies in a wide range, on which the amount provided for the loan depends. Banks will take into account your marital status, the number of minor children, your credit history. Some financial institutions can provide unsecured loan refinancing, but most banks will still require guarantors or a pledge of property, such as a car.
Banks usually consider your application for refinancing a loan from 2 to 5 days, while some others may already issue a loan in a few hours. The term of the loan provided to pay off the debt is usually longer than ordinary lending - from 5 to 7 years. It should be borne in mind that the longer the loan term, the greater the overpayment amount.
It is necessary to know in advance the condition of early repayment of a new loan, since some banks may charge penalties for this.
When the final renewal of the loan occurs, the client will pay a lower interest rate. It is considered profitable if the interest rate on the new loan is at least 2 percentage points lower than the previous one.
Thus, an important condition for obtaining funds for refinancing a loan is a good credit history, as well as the absence of overdue payments on the previous loan.
