By issuing a bank loan, not every borrower can predict their future income. During the term of the loan agreement, various events can occur that somehow affect the financial viability and solvency of citizens. After one or two years, the monthly payment may seem to the borrower to be excessively high, and further loan payments can adversely affect the family budget. There is a way out of this situation: refinancing at a lower percentage.
Definition of refinancing
Re-lending or refinancing is a service for changing the terms of an existing contract with a bank. It consists in:
- interest rate reduction;
- increase loan term;
- reduction in monthly fees.
In other words, if during the repayment of the loan the borrower noticed that loans are issued at other banks at lower rates, you can re-lend at a lower interest rate. This service provides a large number of banks, and therefore it is possible to choose the most attractive conditions.
Types of loans available for refinancing
Re-lending is available for almost any loan:
- consumer;
- car loan;
- mortgage.
For the above loans, it is possible to refinance at a lower percentage in Sberbank and other large banking organizations.
Most banks do not allow credit card refinancing. This is due to the fact that there are no clear deadlines for returning money on them. Re-lending covers only those loans that have a strict repayment schedule established when signing a loan agreement.
Reasons for refinancing
It is possible to refinance at a lower percentage due to official reasons for the confirmation of which it is necessary to submit the agreed documents. These reasons include:
- reduction in official earnings at the main place of work;
- liquidation, reorganization of the employer's company;
- employee reduction
- the dismissal of the employee on the initiative of the employer;
- Holiday to care for the child.
You can also apply for re-lending, having for this other reasons:
- withdrawal of collateral from encumbrance (in this case, you can re-lend at a lower interest rate on the mortgage);
- consolidation of several loans into one;
- change of loan currency;
- dissatisfaction with the current conditions on the existing loan.
Refinancing procedure
Registration of refinancing involves several stages:
- decision of the borrower in which bank to refinance at a lower percentage;
- provision of necessary documents;
- drawing up a bank agreement for refinancing;
- transfer of funds to repay an existing loan;
- closing an existing loan agreement;
- obtaining a certificate confirming its closure;
- monthly payment according to the new repayment schedule.
Mortgage initiators
It is possible to refinance at a lower percentage at the initiative of the borrower or at the suggestion of the bank. In the first case, the person independently seeks a credit institution, collects the necessary documents and provides them to the selected bank. In the second case, the credit institution through various notifications offers customers with a valid loan to issue a new loan on a current account.
If the borrower decides to apply to a third-party bank, the latter repays the existing loan and draws up a new one under other conditions. Upon receipt of refinancing from the credit institution in which the initial loan was opened, it is repaid by the bank itself.
Documents required for re-lending at the initiative of the borrower
In order to independently apply for a loan to a third-party bank, you will need to provide the following documents:
- passport;
- income statement;
- current loan agreement with repayment schedule;
- certificate of lack of debt and late payments.
The bank may accept the client’s request or refuse to issue money. It all depends on the borrower's credit history, its solvency, as well as the list of documents submitted. In order to get the maximum chances of receiving refinancing, it is necessary to provide as many additional documents as possible. They can be:
- certificate of additional earnings (not from the main place of work);
- certificate of ownership of real estate;
- credit history.
Refinancing at a lower percentage in Raiffeisenbank is possible directly on the bank’s official website without leaving home. Filling out the questionnaire is online. If the application is approved, then you need to go to the department with a prepared list of documents for receiving money.
Bank offer refinancing
In the case when the bank independently offers the client to apply for a refinancing, fewer documents will be required, since the loan is considered to be previously approved. Thus, it is easy to refinance at a lower percentage with VTB and other banks. If the borrower has a valid loan and makes payments on it regularly, the bank informs him of the loan offer in the following ways:
- message to phone number;
- a call from the hotline;
- through an ATM when conducting operations with a card;
- through your personal account.
If the borrower has been notified by the above methods, to obtain a loan, you must contact the bank branch. You need to take the necessary documents with you, including:
- passport;
- income statement.
Often, credit organizations issue refinancing only with a passport for those customers who:
- have a bank salary card;
- in good faith already repaid several loans at this credit institution.
Closing an existing loan agreement
After completing all the necessary documents, a new contract is drawn up. If the on-lending takes place at the bank for the initial processing of the loan, the new loan is credited to the same account. The funds will be available to the client the day after the approval of the application by the bank, and in some cases on the day of execution. On the same date, funds are debited to repay the existing loan. From this moment, the amount is available for use by the borrower. He can spend it on his own goals, and can repay other existing loans.
When refinancing in another bank, the procedure takes a longer time. A credit institution transfers funds to an existing loan account. As soon as the money arrives at him, the client needs to draw up an application for full early repayment. The next day, the loan will be repaid, to confirm which it is necessary to take a certificate of full early repayment. The borrower must close this account and take the original supporting certificate.
With the received documents, you can go to the bank, carrying out on-lending. After the certificates are verified by him for reliability, the bank issues a loan agreement with a new repayment schedule.
Important features of refinancing
If the borrower wants to repay several loans through refinancing, then the amount received must be distributed among existing loans. Thus, it is possible to close different types of loans, including credit cards. This method is very convenient, because it allows you to issue one of several loans. This eliminates confusion in repayment, as the term will now be the same, and payment is made only once a month.
Any bank independently determines how to refinance at a lower percentage to a specific borrower. For several clients, different conditions are offered depending on the length of service in the last place, earnings, documents brought. The more the borrower provides information about himself, the more likely it is to get the most favorable conditions. This will affect the interest rate, as well as the term of the loan. If the bank determines the solvency of the client as high, then the percentage will be minimal, and the term may be extended.
Re-lending can be issued several times during the term of the loan agreement. At the same time, refinancing of an existing loan can be issued only by one bank and only in full. Re-lending of one loan to different banks is not allowed, as well as partial repayment by the bank of existing debt.
Making a new loan in exchange for an existing one is what it means to refinance at a lower percentage. This is a banking service that allows borrowers to reduce their monthly expenses. By extending the term of the contract and reducing the interest rate, the monthly payment is reduced, which allows you to more freely manage your family budget. On-lending is becoming increasingly popular, and the number of banks offering it is growing steadily.
Refinancing does not adversely affect the credit history of the borrower, and if repaid in good faith, it further facilitates obtaining a loan on more favorable terms.
Any loan is a way to improve your financial situation with a deferment of full payment. In order not to aggravate your condition, you must choose the most favorable conditions for loans, sometimes changing them.