Those who designed the credit, should be familiar with the following situation: you need the money, do not attach particular importance to how heavy a burden it can be a promissory note, and as a result have to pay a premium. It was only after receiving the loan and the beginning of the payments on it, you start to realize the seriousness of the situation.
You begin to compare their costs and fees with those of other banks and realize that hasty. The question arises, is it possible to reduce their costs, and how to do it. At this moment, demand is such service credit institutions, as refinancing or refinancing.
The essence of refinancing
Refinancing in most cases, in fact, it is the design of a new loan with all the ensuing consequences. It is carried out in order to change into a more favorable direction for the customer loan conditions (lower interest rates, change the loan term).
In rare cases, when the credit agreement provided for changes in interest rates, the bank can simply change it by issuing this additional agreement. This option would be the most advantageous for the borrower.
In case of registration of a new loan for the account is paid off the old (or more previous loans). The procedure can be carried out as the refinancing in the bank, which was originally designed loan and other bank. In carrying out its part of the bank in the required information from your bank about the current state of the credit.
Types of refinanced loans
At the moment, banks make refinancing consumer loans, car loans and mortgage loans. Lately, especially popular refinancing mortgage loans, since the amount in this case is large and the cost can be reduced significantly.
Many new proposals of banks with relatively favorable conditions for clients. Particularly interesting of these conditions can be for those borrowers who took out loans in the period of high interest rates. Unable to make refinancing in the event that the loan agreement there is a moratorium on the early extinction.
Advantages and disadvantages
Obviously, the advantage of this form of credit for the borrower is to reduce the interest rate or other conditions change (eg date), which will help to make payment more convenient and significantly reduce costs.
However, there are some downsides. Firstly, you will need to re-pass the registration procedure, and then may be additional costs in the form of various bank fees, loan insurance. Most felt they would be in the case of refinancing a mortgage, especially if refinancing will be made at another bank. We'll have to again assess the property, renew insurance contracts and documents on the property, including mortgage.
The feasibility of refinancing
Of course, the best option for the borrower could refinance your bank, and, by simply changing the rate with the help of the signing of the additional agreement. Only the chance of a similar set of circumstances a bit. Therefore, in each case should be individually considered the advisability of such a step.
To do this, you must take into account all associated costs, to calculate the final overpayment and compare it to current conditions. It makes no sense to carry out this procedure if the early repayment under the existing loan is possible only with the use of penalties. Most beneficial to refinance for the first term, when the principal debt has almost paid off, and on the condition that the customer does not incur any additional costs.