We start with a situation where you have only one loan. The market is constantly changing and you will find that you can get better conditions with your competition. How to get smaller installments or even get even more advantageous interest? As a solution, refinancing loans is offered.
What does refinancing a loan mean?
Refinancing a loan means transferring it to another bank that offers better terms for you. The new bank repays the entire loan with the old bank and then offers you a new loan of the same amount, but with different conditions.
What types of loans can be refinanced?
Virtually all types of loans can be refinanced, ie consumer loans, building society loans, mortgages, but also credit cards or overdrafts.
When is refinancing worthwhile?
There are certain costs involved in changing a bank – in particular, mortgages relate to the cost of some documents that the bank requests. Therefore, it is advisable to calculate well how much the transfer of the loan would save on installments, interest, fees to the bank, etc. The question is whether this step will pay off in case of saving a few hundred crowns.
Is it possible to raise additional money beyond the existing loan when refinancing?
Yes. However, financial institutions tend to have ceilings for the sum of transferred loans and new credit.
When is it appropriate to refinance the loan?
Loans such as mortgages or building savings loans cannot be refinanced at any time. Banks usually have a fixation period during which it is not possible to switch to another bank for free. On the contrary, they are contractually charged for similar changes.
However, if the end of fixation is approaching, it is advantageous to look for competing offers a few months before the final date. The best option is to present the existing bank and if it does not respond, it is time to move elsewhere.
Transferring a mortgage is not associated with paperwork as people sometimes fear. The only document that the bank usually requests from you is a written quantification of the loan balance. The rest is usually arranged by the bank itself.
Some people deal with unfavorable loans with another loan, often even less advantageous than the original one. However, this “wedge-breaking” can lead to a debt spiral that does not bode well. If you have multiple loans, an elegant and functional solution for just a few loans is loan consolidation.
What does loan consolidation mean?
If you are repaying several loans, often from different providers, you consolidate them into a single loan at a single financial institution through consolidation.
With this operation you can:
- Make your finances clearer
- Save on bank fees paid to several companies
- Decrease the amount of the monthly payment
- Pay only monthly installment
For all this, however, you usually extend the repayment period of the entire sum of money.
What types of loans can be consolidated?
Almost all types of loans can be consolidated: bank and non-bank loans, credit cards and overdraft.
How many loans can be combined into one?
The number of loans is basically unlimited. The total amount is important. Banks usually consolidate loans up to $ 800,000. However, loans where the debtor is in default are not eligible for consolidation.
Is it possible to get extra money when consolidating?
As with refinancing, this is possible. The Bank will check whether you have paid your obligations in a timely manner. She will also be interested in your creditworthiness.