MFIs impose lower requirements on future borrowers when receiving amounts of up to 50 thousand rubles. However, this is offset by short loan periods - from 7 to 30 days, as well as a high rate of up to 2% per day. Unlike banks, MFIs do not require a lot of papers to get a loan, especially for small amounts.
As a result of several loans taken in microfinance organizations and a high daily interest rate, a person may fall into a debt hole caused by an inability to repay the debt that has been formed on time. The consequences of this action are sad. Often arrears with overdue payments of more than 90-120 days go to collection bureaus, or they are transferred in the form of legal proceedings to the court to recover the established amount through bailiffs.
A self-credited person cannot solve financial problems, therefore there are two ways out of this difficult economic situation. The first is a judicial decision. This is either an arrest of property with its subsequent sale, or bankruptcy if the total amount of debts is more than 500 thousand rubles. You can avoid such legal consequences. To do this, there are debt refinancing programs that are provided by various financial organizations. This method allows not only to quickly close existing debts, but also to choose a rate for a single loan amount that can be paid monthly.
Refinancing in MFIs debts appeared relatively recently. Previously, similar services were offered by banks to close debts on consumer, auto or mortgage loans.
In which cases refinancing may be required
In order not to bring the matter to trial with a possible loss of personal property, both movable and immovable, do not accumulate debt. In case of difficulties in the early stages of loan repayment, it is worth considering the option of debt restructuring.
Refinancing loans in MFIs will help to avoid accumulation of debts. However, choosing this method, it is worth considering all the nuances, starting from assessing your solvency and ending with the selection of the organization itself, which will deal with debt restructuring.
Difficulties borrowers may face
Refinancing in MFIs with arrears without collateral is a transaction for any financial institution associated with risk. This is explained by the fact that a person who has already admitted skipping payments for 1 or more months applies. Banks and other financial institutions, issuing loans, calculate the solvency of customers.
There are situations in which you have to increase your income and officially declare it according to the established forms of documents (2-personal income tax) in order to increase the chances of approving such a financial procedure.
The main problem is that microcredit companies are loyal to citizens who are not officially employed. If you have to apply for debt restructuring to the bank, then there is a high probability of rejection, as employees will need to receive legal confirmation of income.
Key Refinancing Activities
Refinancing loans in MFIs with delays requires a number of actions from the debtor. You should not expect that this procedure will be as fast as issuing the loan itself. Now, when applying for restructuring, employees of a financial institution will more thoroughly check a person for his solvency, as well as responsibility.
To increase the chances of approval, you can use the guarantee. This slightly increases the chances that the microcredit company or bank will approve the decision on refinancing. It is important that the person has a small but stable monthly income. If there is no work and income is not declared, it will be impossible to obtain a prolongation.
Therefore, turning to the bank, it is worth thinking about a guarantor in the person of immediate relatives and the availability of official employment.
Where to go
Refinancing in MFIs is remotely possible, but only at the initial stages. If the amount of debt is small, up to 15-20 thousand rubles, then you can use the service via the Internet, without a personal visit to the office of a credit institution.
There are 3 main options where overdue debt is refinanced:
- In a microcredit organization, where the debt was formed.
- In another microfinance organization.
- In the bank.
Each of the listed institutions has its own conditions for the provision of this service. It is important to review all the conditions before applying and check whether the borrower corresponds to them at the time of application.
In MFIs where there is debt
Refinancing in MFIs with arrears without collateral is the most common option. It will be successful even if the client has already applied for a loan more than once and paid it on time. Then the company employees themselves can offer to restructure the debt on more favorable terms.
Often, microcredit companies offer their customers the option of paying off debt for a longer period. If a loan was taken for 7-14 days, it can be extended for up to 2 months. An interest rate freeze is also added to this condition. This means that the client will be required to pay the resulting debt on time without accruing daily interest.
The decision on this is made by the employees of the microfinance organization. Therefore, it is important to handle the early stages of arrears. This will quickly solve the problem with the repayment of the loan.
To another microfinance organization
Refinancing in MFIs without collateral is also offered by other market participants. They do this to expand their customer base. However, there may be difficulties associated with the conditions for closing the old debt and issuing a new loan.
The conditions in this case may practically not differ. Formally, the borrower will pay off the old debt, but he will immediately have a new one, on the same terms as before. In this case, there is a risk of falling into a situation where income will not be enough to pay off payments. It should be understood that the terms of such loans are also limited.
To close the new debt, the loaned person will have no more than 30 days. You should apply for restructuring only if the income allows you to close the debt on time.
To the bank
Refinancing of MFIs in a bank is possible only if the citizen has official income. It is worth noting that such financial structures are strictly related to debtors. Therefore, if there are overdue loans for a period of more than 90–120 days, hoping for approval by the bank’s specialists is not worth the debt restructuring.
However, there are programs also aimed at attracting new customers. Before contacting you should visit the official websites of banks and study the proposed types of loans, as well as the conditions for obtaining them. It is worth noting that such programs are not often introduced and are promotions to attract new borrowers.
The procedure for processing refinancing
All actions of the borrower should be phased in order to obtain a positive decision on debt restructuring. It is important to highlight the main points when contacting financial institutions:
- Get a certificate in the form of 2-personal income tax with confirmation of real monthly income. If the employment is not official, you will have to fix it.
- To increase the chances of approving refinancing, seek the help of friends or relatives so that they become guarantors.
- Assess all your financial risks. The rate after refinancing will be lower, however, this does not relieve the borrower of liability in the form of repayment of new debt.
- View all available offers in the region where the borrower is located.
In Moscow, overdue refinancing with MFIs is a popular service. Therefore, it is provided not only by microcredit organizations or banks themselves, but also by other legal entities that, under the terms of a loan agreement, incur obligations to pay off the outstanding debts of the applicant. After this, a new debt is formed, but already to the company itself, and the amount of monthly payments is established.
Basic requirements for borrowers
Debt refinancing in an MFI is a serious financial transaction. Therefore, it has the legal form established by law. It is important that the borrower is suitable for all requirements. Otherwise, debt restructuring will be denied.
Assessing the existing conditions in the refinancing and lending market, we can distinguish the main points from the established requirements:
- age of the credited person from 21 years;
- the availability of official employment;
- income not lower than the subsistence level established in the region;
- the availability of guarantors, if there are risks of non-payment of the loan after its restructuring.
In addition, an MFI or a bank may put forward additional requirements for a client. It is also necessary to provide contact information from the official place of work, so that when contacting, security service specialists check for compliance with the data specified in the application form and certificate 2-NDFL.
When they can refuse
Overdue refinancing in MFIs also has established limits. In general, microcredit companies do not provide restructuring if the debt exceeds 100 thousand rubles. This is due to the fact that the rate is calculated not for a month, but for a day. As a result, the amount of new debt will only increase, and it will have to be repaid in several years.
The second reason for refusal is associated with a skipping payment of more than 90 days. Credit institutions usually transfer such debts to collection bureaus or send them to the court to collect loans through bailiffs. It is possible to obtain a prolongation with a long term of overdue debt only in the MFI where this loan was taken.
False information indicated in the questionnaire when applying for refinancing may also lead to the fact that the provision of debt restructuring may be refused. Only reliable data should be indicated.
What are the risks of debt refinancing?
Refinancing microcredits in MFIs helps to get rid of old debts, but at the same time the borrower has a different responsibility in the form of a loan with a new interest rate. It is important to calculate whether there is enough money to make monthly payments.
All late payments for a period of more than 10 days are noted in the credit history of the client. Upon a new appeal to a microfinance company or a bank, specialists will receive an extract from the NBCH and will check how responsible the person was in paying the previous debt.
What points are important to pay attention to
In MFIs, refinancing can be carried out online in your account. Some microcredit organizations offer this opportunity to their regular customers. Therefore, when creating debt, it is worthwhile to clarify with the company's specialists whether it is possible to freeze interest accrual or ask to increase the loan term.
You should not take loans from other microfinance organizations, even if they received approval when the amount of the monthly payment is much higher than the financial capabilities of the borrower. This can lead to even more debt. Banks, as a rule, take into account the solvency of the client and give loans only if he spends on them no more than 40-50% of his income. But microcredit companies often neglect such calculations.
Summarizing
In MFIs, refinancing can be provided early on and with small amounts. It is important to understand that refinancing at the bank can be obtained if there were no delinquencies in loans. To do this, you must pre-calculate your financial risks.
If there is a possibility that at the end of the month the required amount will not be collected to pay off the microloan, it is worth contacting the bank to get a loan for any purpose or credit card. This will close the debt to MFIs and reduce the percentage of monthly payments. An improved credit history will also be a bonus to this.