In many domestic financial institutions, there is a service called “consumer loans refinancing”. This procedure, as a rule, is beneficial to both the client and the bank. After all, it allows the borrower to improve the conditions for servicing the debt, and the lender - to prevent the transaction from becoming delayed. Some banks refinance not only their own transactions, but also their competitors, thus taking part of the portfolio from them.
Three main reasons for refinancing
This is primarily about large loans, issued for the long term. These are mortgages and loans secured by vehicles. Banks offer to refinance consumer loans in cases where it is likely that they can become problematic. Then financial institutions make concessions to customers and agree to draw up a new transaction with a reduction in the rate (if possible) or an extension of the term.
If we consider the situation from the point of view of the client, then he should think about refinancing, when, after some time, it turned out that the loan was issued far from the most favorable conditions. Having paid part of his debt and having proved his solvency in practice, the borrower has the right to rely on a certain loyalty.
The second reason why you can use the service "re-lending to consumer loans" - too large a payment. Unfortunately, sometimes the client simply does not calculate his strength, or circumstances change over time not for the better. And it turns out that the conditions seem to be pretty good, but the loan is so burdensome for a person that he can cope with it literally with all his might. Then it makes sense to re-enter the deal for a longer period or change the payment scheme so that they can be done by the borrower.
The third reason is the desire to change the lender. If a client is serviced at another bank, receives wages there, uses other services, then perhaps they will be offered there also re-crediting of consumer loans. Naturally, the terms of the new agreement should not be worse than the previous one, otherwise the procedure will lose its meaning.
In which banks is this service available?
Many banks are engaged in refinancing “foreign” loans. This primarily concerns large system institutions, such as Sberbank. Consumer loans are offered here both to their clients, which are on the verge of solvency, and to external borrowers. The latter can make a deal only if there are no delays in the current one.
At VTB Bank, a consumer loan refinancing is also possible. Here, as in Sberbank, they are happy to give money so that the client can close the “alien” transaction at the expense of them.
Refinancing Leaders
In addition to the above-mentioned financial institutions, publicly invites foreign borrowers to issue Alfa-Bank consumer loans refinancing. The institution positions itself as a leader in this area of active operations and provides an opportunity for the population to get rid of transactions executed on unfavorable conditions by issuing new ones. If you believe advertising, this institution is ready to refinance literally any debt, from installments to mortgages. But in reality we are talking mainly about quite large consumer loans. The leader, as always, is mortgage and other types of long-term secured loans.
Terms of Service
They, as a rule, correspond to those applicable to similar products at the time of transaction. For example, in Sberbank, mortgages are offered on -lending for a period of up to 20 years. The situation is similar in VTB and Alfa-Bank. The interest rate on the new transaction will depend on the amount, as well as on the relationship with the client. So, Sberbank offers preferential refinancing conditions for employees of enterprises serviced here on salary projects. On average, it ranges from 14 to 16 per annum in national currency.
In VTB, interest is slightly higher (from 17 per annum), but the process of approval and execution is faster. All records are beaten by the leader in this direction - Alfa-Bank. He offers to renew the mortgage at only 12.2 per annum.
How is consumer loans refinancing?
If a person has firmly decided to refinance his debt, then the first thing he needs to do is to apply to the institution where he plans to draw up a new deal. As a rule, they provide a salary certificate (for six months or a year, depending on the requirements of the bank) and a passport. Sometimes future lenders ask for a document on the outstanding balance and the quality of transaction services. Some request this information from the credit bureaus on their own.
At the next stage, the bank agrees with the client to issue a new loan to repay the current one and reports on its decision. In the case when it is positive, the borrower informs his bank about the upcoming transaction (refinancing is not possible without his consent) and signs the agreement.
Documents issued in the process of re-lending
In addition to the application form, which the client submits at the approval stage, a loan agreement is necessarily concluded. Unlike ordinary transactions, the purpose of issuing cash will be to repay the loan at another bank. At the request of the creditor, an insurance contract may be additionally executed . This applies only to cases when the transaction is secured by a pledge (real estate, car or other).
Some lenders do not require insurance of collateral, which significantly reduces the cost of the procedure, especially when it comes to car loans. When refinancing a transaction the mortgage of which is real estate, you will have to renew the mortgage agreement. This is usually associated with additional costs, since it is notarized.
Overdue consumer loans
If the transaction is serviced in accordance with the terms of the contract, it will not be difficult to refinance it. The situation is different with loans with violated obligations. If the borrower has delayed in one bank, then he will have to make every effort to prove his solvency to another.
So re-crediting an overdue transaction is unlikely (if only as part of a restructuring within the same financial institution). The bank is interested in the quality of its loan portfolio. Therefore, it can go towards the client and draw up a new deal for him to pay off the existing overdue debt, but on condition that he is convinced of his solvency. So, re-crediting a problem loan is, in principle, possible, but on certain conditions (for example, making several “control payments” for an existing transaction).
What should a borrower pay attention to?
Having made the decision on the need for re-lending, before proceeding with the direct execution, you should once again read the current contract. If under its terms the borrower must pay a serious penalty to the bank upon early repayment, then you can immediately forget about refinancing. After all, having executed a new deal, the client will be forced to fully pay off the current one. And this will significantly increase the amount of debt, so the benefit will be very doubtful.
Among other things, you need to carefully read the new agreement so that its conditions do not turn out to be more enslaving. If, after careful analysis, the client understands that it is beneficial for him, you need to immediately move from thoughts to actions.
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