Many people do not understand the term "refinancing." Therefore, they do not use the capabilities of this banking service. Meanwhile, sometimes it allows not only to reduce interest on loans, but also to reduce the terms of use of borrowed funds. Also, in some cases, such a procedure can seriously improve credit history. Refinancing of overdue loans is an excellent opportunity for an individual to review for the better the existing lending conditions.
Refinancing as a concept
As a rule, refinancing is the provision of a new loan to cover an existing one, but on more favorable terms. You can request such a service in the same bank or in another. As a rule, refinancing a loan with past due payments in the same financial institution is impossible. An obstacle to this are two factors:
- Violation by the borrower of the discipline of timely repayment of loan obligations.
- The interest rates on loans in this financial institution may be limited by the rules of this institution and may not be profitable in the light of other market offers.
Examine your bank offer
Prior to the refinancing procedure, it is worth filing an application with a bank with which you already have an agreement with a request to provide information on the possibilities and conditions for taking another loan to cover an existing one. Standard documents for processing such a requirement are available at each individual service department.
If the borrower's goal is not to refinance overdue loans, then, as a rule, the bank can consider the application positively, providing the most favorable new loan terms. In any case, as commercial entities, financial institutions are as interested as possible:
- in the elimination of problems with payments;
- in saving an individual by his client.
Benefits of taking a new loan
As a rule, it is possible to take a new loan to repay an existing one if the following conditions are met:
- Lack of arrears.
- Lack of fines.
- Timely payment of several payments.
Refinancing of any loan is a targeted banking product, therefore it is provided under a special agreement with reduced interest rates to repay the existing borrowing.
Such a service is relevant if:
- there is an opportunity to reduce the% of the loan;
- monthly payments can be reduced;
- you need to stretch the loan terms;
- you need to get a credit vacation;
- It is required to change the currency in which the borrowing was made;
- it is advisable to combine all loans into one.
Bank Benefits
By giving customers the opportunity to refinance overdue debts, credit organizations also benefit.
| Benefits of the current bank | Benefits of another bank |
| Chance of repayment of borrowed funds | The acquisition of a new loyal customer |
| Profit on a new loan | Profit from the loan |
| There is no need to conduct legal operations to return your assets | The ability to rely on the implementation of other banking products to the client |
| An opportunity to sell other services to an existing customer in the future |
The catch of obtaining a new loan to close the existing one is the presence of additional costs:
- To pay for a loan service.
- A service for considering a loan application.
- For the services of an insurance company.
- On actions to remove the security burden.
All these features for taking a new loan must be found out before refinancing overdue loans.
Bad loans
Banks a priori do not like customers with overdue loans. However, some financial institutions are tackling the problem. To do this, a potential client must, when applying for a loan from them:
- Prove that the cause of the delay was serious problems.
- Provide the necessary documents proving the availability of the opportunity to repay the newly received loan.
It is necessary to apply for refinancing debt with the current bank in case of problems with payments as quickly as possible, without refusing to pay and not trying to hide. But if negotiations with this financial institution are at an impasse, then you should think about finding an organization that is ready to take on the issue of refinancing overdue loans with a bad history.
It is absolutely realistic to achieve a loan if the delay in monthly payments does not exceed three months. In this case, you must have the following arguments:
- Find a surety.
- Offer a collateral in the form of a loan security.
Overdue Lending Program
How does long-term debt arise? In case of untimely payment of the loan, the bank may accrue interest, which are removed at the next payment. If the debtor ceases to fulfill monthly obligations under the contract, it is transferred to the interbank database of unreliable customers. So he gets problems that will complicate the receipt of funds in debt at other banks.
Nevertheless, it is possible and necessary to try to find an institution that is willing to refinance an overdue loan. We must be prepared to provide the following documents as evidence of our willingness to cooperate and pay our debts:
- A questionnaire filled out in the form of a financial institution, in which it is necessary to indicate the presence of a loan, its size and the delay time for it.
- Present passport.
- Provide TIN or driver license.
- Bring a certificate of income from work.
Additionally, you may need these documents:
- Confirmation of experience.
- Certificate from a narcologist.
- Help from a psychiatrist.
Types of loans for which banks provide improved conditions
Currently, there is the possibility of refinancing almost any loan:
- mortgage;
- to buy a car;
- consumer;
- overdrafts on cards.
However, most people turn to credit institutions to refinance loans from other banks with overdue debts on consumer loans and car loans. This is due to the fact that these services are given at rather high interest rates.
The procedure for obtaining a loan
It is no secret that in order to effectively resolve the issue of obtaining a new loan, it is important that it be provided at the lowest possible percentage. Here you need to work: to conduct a thorough analysis of all available market offers and choose the best. Further (after obtaining the approval of the bank), the client:
- Signs a contract with him on a new loan and provides details on which it is necessary to pay funds that repay the debt.
- Gets the schedule and conditions for the monthly deposit of funds into the account.
What to look for
- Most financial institutions offer rather high interest rates on loans, additionally forcing the client to conclude insurance contracts with affiliated organizations for the duration of the loan obligations. Therefore, you must be very careful when reading the contract.Sometimes the “profitable” rate is depreciated by an additionally imposed service, which increases debt by 20-30%, and at the same time it does not come back even if the obligations to the credit institution are closed ahead of schedule. If so, then it is worth looking for another bank to refinance an overdue loan so as not to make impossible obligations.
- The difference in interest rates on loans at different banks can reach 10%, which affects the size of monthly payments. As a rule, the most loyal conditions for refinancing an overdue loan are with Sberbank. If the borrower is a client of this organization, receiving a salary on the card, then practically it will not be necessary to provide any documents for considering the application. As a rule, you just need to fill out the standard form on the website of this institution, and after a couple of hours to get approval or denial of a loan. You can also contact any nearest office and make an application for a loan, using the help of an employee.
When taking new loans to close old ones, you should first use a special calculator posted on the Internet. So you can calculate how much the new deal will be more profitable than the previous one. It is worth considering that if you have one loan, taking the next one is problematic - sometimes it is possible only after a few months.
To summarize
- It is quite possible to get a new loan when there is an outstanding loan if there is a favorable credit history. It is formed by banks and may be corrupted by the non-obligation of making payments. To prevent this from happening, it is important to calculate your capabilities and submit applications for refinancing a loan in advance. Often, the decision on such operations is fast, which will help to get rid of the old debt, without spoiling your reputation as a borrower. You need to contact several banks if negotiations with the existing one are unsuccessful.
- If it was not possible to avoid a delay in the loan, then you can refinance debt obligations within 10-14 days after the missed payment date. Exactly until such time as the data on the violation has become known to all credit organizations. With a small delay, it is easier to contact other banks, having previously studied their lending conditions.
- If the violation of debt obligations is more than two weeks, but less than three months, the refinancing procedure, of course, will be somewhat more complicated and will require more documents from the borrower. However, it is worth going through to ease its burden of financial obligations.
In all situations concerning the possibility of late arrears on loans, one should not avoid interaction with financial institutions, as over time this position only aggravates the negative situation that has arisen.
Meanwhile, the banking market is wide. This provides good opportunities for the selection and purchase of products that will help solve problems, arrange for value and provide opportunities for applying for loans to any banks in the future.
