Sometimes circumstances evolve in such a way that the borrower cannot fully make payments for credit commitments. Salvation in this difficult situation may be refinancing loans. It should be noted that such a banking service is not available to all. It can only be used by trusted clients, ie with a credible credit history. In addition, they should have no delay in making monthly payments. In addition, bank employees will pay close attention to income levels. Sufficient is the financial situation of the client, which is able to immediately cover the costs of two loan programs. We need to say a few words about what is refinancing a loan.
The essence of this banking service
The financial institution will issue the client new borrowed funds with smaller monthly payments, but for a longer period. After receiving the necessary amount, he repays the loan earlier. It should be noted that it is possible to use refinancing services for any type of loan, whether it be consumer loans, car loans or mortgages.
Often borrowers tend to refinance Previously, the mortgage loan and this is logical, because such a banking product is issued for a relatively long time, during which interest rates may change in a smaller direction. Before taking such a decision, it should be taken into account that this procedure may include the following costs:
- bank commission for early repayment (up to 5%);
- commissions for opening and maintaining an account, signing a contract and others;
- appreciation of real estate;
- payment of notarial services for performance of the contract;
- and more.
In general, the procedure of refinancing mortgage loans is somewhat complicated. Banking institutions most often refuse to provide such a program for this kind of loans. This trend is easily explained, because in this case, financial institutions for some time will lose the ability to collateral control, leading to the risk of re-registration of real estate is not a banking institution.
What is refinancing a loan?
Thus, the refinancing of the loan in 2009. The above example concerns one of the most complicated procedures, and therefore the requirements for borrowers are reinforced. For this reason, only large banks provide their clients with refinancing loans, such as Sberbank.
Some borrowers find themselves in less advantageous situationsposition, taking a new loan. This is because consumers often evaluate the benefits of a particular banking product solely on the basis of interest rates. This is bad, because various temptations can be hidden for an attractive low rate. Credit experts note that refinancing can only be profitable if the interest rate of the proposed product is at least 2% lower.