Sometimes circumstances develop in such a way that the borrower cannot fully make payments on loan obligations. Refinancing a loan can be a salvation in this difficult situation. It is worth noting that such a banking service is not available to everyone. Only trustworthy customers, that is, having an impeccable credit history, can use it. To do this, they should not have delays in making monthly payments. In addition, bank employees will pay close attention to the level of income. Sufficient is the financial condition of the client, which is able to cover the costs of two loan programs at once. It is necessary to say a few words about what credit refinancing is.
The essence of this banking service is as follows: the financial institution gives the client new
borrowed funds with a smaller monthly payment, but for a longer period. Having received the necessary amount, he repays the loan taken earlier. It is noteworthy that you can resort to a refinancing service for any type of lending, whether it be a consumer loan, car loan or mortgage.
Often, borrowers seek to refinance a mortgage loan taken earlier, and this is logical, because such a banking product is issued for a rather long period, during which interest rates can change downwards. Before making such a decision, it is advisable to consider that this procedure may entail the following costs:
- commission to the bank for early repayment of the loan (up to 5%);
- commission for opening and maintaining an account, conclusion of an agreement and others;
- assessment of the property;
- payment of notary services for the execution of the contract;
- and others.
In general, the procedure for refinancing a mortgage loan is somewhat complicated. Banking institutions most often refuse to provide such a program specifically for this type of lending. This trend is easily explained, because in this case, financial institutions for a certain period of time lose the ability to exercise control over collateralized property, as a result of which, there is a risk of re-registration of real estate not to a banking institution.
Thus, the
refinancing of a loan in the above example refers to one of the most complex procedures, and, accordingly, the requirements for borrowers are tightened. For this reason, only large banks provide their customers with refinancing of a loan, for example, Sberbank.
Some borrowers are in a less favorable position by taking a new loan. This is because consumers often evaluate the benefits of a banking product solely in terms of interest rates. This is wrong, because a variety of “pitfalls” can be hidden behind an attractively low rate. Lending experts note that refinancing can only be beneficial if the interest rate on the proposed product is less than at least 2%.