Modern life is a cycle of circumstances that can greatly disrupt well-designed and constructed plans. The problem of any financial issues over the past few decades, modern people are accustomed to solve in banking institutions. Citizens had the opportunity to borrow money to buy real estate, automobiles, household appliances, furniture and other goods that are necessary for a normal existence.
Lending is also provided for the purchase of building materials, the solution of business problems, treatment, recreation, study and other needs. Every citizen who has a good credit history and regular income can take a loan from the bank. It is easy enough to get any type of loan due to the fact that a large number of loan programs are thought out in the banking sector, which, like a magic wand, help solve current problems. Bank customers often do not even think about situations that may arise in which repayment of the debt will become a problem.
What may affect the possibility of making mandatory payments
The reasons for the complexity of the mass. They can be:
- job loss;
- disease;
- currency rate jump;
- death of one of the family members;
- one of the earning family members will become unemployed;
- negligence;
- the emergence of other life problems that have led to financial losses.
Possible problems with loan defaults
Non-payment of
obligatory payments under the concluded loan agreement entails a sequence of additional problems. It all starts with calls from bank employees, then letters of complaint from the management of the banking institution, a lawsuit, and executive officers appear at the address of the debtor. And, even worse, threats come from special services. Intimidation of unscrupulous borrowers is becoming one of the popular ways to demand borrowed funds. In addition, credit bondage also provides for default interest and bank fines, which increase the total amount of debt several times. One of the options for overcoming this situation, according to experts, is the borrowing of funds to repay the amount taken. To find the answer to the question "how to repay a loan with a loan", you must have some important information. In banking legislation, there is a term that means the full repayment of borrowed funds on the basis of a new loan at the bank. If you understand the essence, then in the process of refinancing or on-lending, you need to take a loan to pay off another loan.
The main advantages of refinancing
- Refinancing helps bank customers get out of bonded financial problems and correct mistakes made earlier.
- This method of loan repayment actually increases the repayment period without any financial losses.
- Re-lending allows the borrower of funds to significantly reduce their mandatory monthly payment when paying the debt to the bank.
- If it is good to study all the loan programs of the country's banks before taking a loan to pay off the loan, you can even reduce the main amount of debt.
- Refinancing avoids the accrual of fines and penalties for default on the principal amount of debt.
- This debt payment option helps to avoid litigation, which requires a lot of time and nerves.
- Before repaying a loan with a loan, you can choose a bank with the most favorable conditions.
What you need to pay attention to before concluding a refinancing agreement
Before you repay a loan with a loan, you must carefully study the primary loan agreement. Banking policy provides for special programs that contribute to the repayment of debt through an additional loan. Often the possibility of refinancing is specified in the contract itself. It occurs after a certain amount of time has passed. In each bank, the period that must pass before concluding a refinancing agreement is different. On average, its duration is six months, but other options are possible: three months or a year. The management of the banking institution is self-interested in ensuring that the repayment of the borrowed amount is fulfilled, therefore, the terms of the loan program provide the bank's debtors with the opportunity to cope with the established debt payments by reducing interest on the main body of the loan, increasing the loan term and other loyal programs.
It is necessary to carefully re-read the contract before quickly repaying the loan
Refinancing is not suitable for all loan agreements. Rather, for some of them, this method of paying off debt does not matter.
There are some programs of banking institutions that do not allow early repayment of the loan body. Therefore, it is necessary to clarify this possibility before signing the documents. Banking workers argue that there are loan programs that do not provide for changes to the schedule of payments on arrears. In such cases, the refinancing agreement does not make sense. Moreover, there are banks that have a fee for early repayment of a loan, so these details need to be clarified. In 2011, the law prohibited the use of this method of calculating interest, but they still occur as one of the types of hidden commissions.
Is it possible to repay a loan ahead of schedule and what are the advantages of early repayment?
Early repayment of debt has many advantages. First of all, they relate to the psychological state of the debtor. When the borrowed amount is fully surrendered, the person feels much more comfortable and freer. If you analyze the payments, the early repayment of the loan automatically reduces the amount of the principal debt of the borrower by reducing the amount of accrued interest. An important advantage of debt repayment is that the money saved can be invested in a profitable business, and not pay the bank. Early repayment of the loan in most cases is beneficial for customers, but not banking institutions. They lose the outstanding interest on loans in case of early repayment. Until 2011, many banks generally provided various commissions and fines in large amounts for pre-paid debt. Now the legislation has improved loan conditions for borrowers of funds, but a moratorium for a period of six months, a year or at least three months for early repayment still exists. You can clarify the duration of the ban in each bank in the loan agreement before
repaying the loan ahead of schedule.Consumer loan refinancing
Consumer loans are taken for a period much less than larger debts, but at the same time they are not very beneficial for the family budget. You may have seen a loan interest rate that is much lower than your bank, which may be an incentive for refinancing. Often it decreases after some time. This can be considered some risk of the borrower, who borrowed the amount on less favorable terms. For example, your loan was issued by Privatbank. How to repay a loan in advance at this financial institution must be deducted in the loan agreement. If it has the possibility of refinancing on more favorable terms, then to reduce the interest rate it is enough to draw up just a standard package of documents. If you decide to take a new loan from another bank, you will need to collect additional documents.
Car loan refinancing
Before you quickly repay a loan to buy a car, you need to collect an additional package of documents that relate to the car and the current loan. This package of documents depends on the purpose of concluding a refinancing agreement. If you are applying for a loan to buy another car, the procedure for drawing up an agreement requires the sale of the first car in the passenger compartment. The proceeds will be a down payment on a refinancing agreement. But in any case, it is necessary to conclude a new insurance, in which the beneficiary will indicate another bank.
Get a loan from a bank to pay off mortgage debt
This type of refinancing is considered the most difficult to process, it requires the presence of additional documents relating to the property, the acquisition of which was taken a loan, payments made, the balance of the loan body and other details. In this case, it is necessary to conclude a new insurance contract indicating the new bank, make an assessment of real estate at the moment and re-register the property. Renewal of a new mortgage agreement will entail additional significant costs, they will be justified under more favorable credit conditions only if the amount of the unpaid mortgage body is large.
Additional package of documents and conditions for refinancing in other banks
Before you repay a loan by borrowing money from another bank, you need to collect additional documents for its preparation. In addition to the standard package, to complete the transaction, it will be necessary to collect certificates that characterize the status of the current loan.
- Before repaying a loan ahead of time to purchase real estate or a car by borrowing funds, it is necessary to present a previously signed loan agreement.
- It is also necessary to prepare a debt repayment schedule indicating the amount of monthly obligatory payments.
- If additional agreements have been concluded on the current loan (contract of assignment, pledge), then the originals of these agreements must be presented when registering a new loan.
- At the bank to which you owe money, take a certificate of debt balance.
- If refinancing is to be concluded in a large amount (it is indicated in each bank), then it will be necessary to additionally draw up a guarantee agreement for at least one individual.