Modern life is a cycle of cycles that can very well break well-designed and constructed plans. The problem of the emergence of any financial problems in the last few decades, modern people are used to solve in banking institutions.
Citizens have the opportunity to borrow money for the purchase of real estate, cars, household appliances, furniture and other goods that are essential for normal existence.
Lending is also provided for building materials, business problem solving, treatment, rest, study and other needs. Any citizen with a good credit history and permanent income can take a bank loan.
It is easy to get any kind of credit, given that many banking programs have been devised in the banking sector, which, like the magic wand, help solve current problems. Bank clients often do not realize that there may be situations where repayment of debt becomes a problem.
What may affect your ability to make compulsory payments
Causes of the complexity of the matter. These can be:
- loss of employment;
- exchange rate jump;
- death of a family member;
- one of the earning family members becomes unemployed;
- the emergence of other life problems that have withdrawn financial losses.
Possible problems with loan default
The non-payment of obligatory payments to prisoners of the credit agreement is dragged by a number of other problems. It all starts with the challenges of bank employees, then complaints from the management of the banking institution, legal action, employees of executive service appear at the address of the debtor.
And even worse are the threats from special services. The intimidation of unscrupulous borrowers is becoming one of the popular ways of demanding loans. In addition, credit bondage also provides a fine for non-payment of debt and bank fines, which several times increase the total amount of debt.
One way out of this situation, according to experts, is to borrow money to repay the amount received. To find the answer to the question “how to repay a loan with a loan”, you need to have some important information.
There is a term in the Banking Act that means full repayment of borrowed funds on the basis of a new loan at the bank. If you understand the essence, in the process of refinancing or lending you must take a loan to repay another loan.
Key benefits of lending
- Refinancing helps banks’ clients recover from the enslaving problems with their funds, and correct the mistakes that have been made.
- This repayment method actually increases the repayment period without any financial losses.
- Re-lending allows the borrower to significantly reduce its mandatory monthly payments when repaying the debt to the bank.
- If you study well all lending programs of banks in the country before you take a loan to repay the loan, you can even reduce the principal of the debt.
- Refinancing allows you to avoid charging fines and penalties for defaulting debt.
- This debt repayment option helps to avoid litigation that requires a lot of time and nerves.
- Before repaying a loan with a loan, you can choose a bank with the most favorable terms.
What you need to pay attention to before signing a refinancing contract
Before repaying the loan carefully examine the primary loan agreement. The banking policy provides for special programs that contribute to the repayment of debt through an additional loan.
Often the refinancing option is specified in the contract itself. This occurs after a certain time. In each bank, the term that must pass before a refinancing agreement is concluded is different.
Its average duration is six months, but other options are possible: three months or a year. The management of the banking institution itself is concerned that the borrowing amount has been met, therefore the loan program conditions provide the bank’s borrowers with the ability to cope with established debt payments by reducing interest on the bulk of the loan, extending the loan period and other loyal programs.
You must read the contract carefully before paying off the loan quickly
Refinancing is not suitable for all credit agreements. Rather, for some of them, this kind of debt repayment does not matter.
There are some banking programs. Institutions that do not allow early repayment of the credit authority. It is, therefore, necessary to clarify this option before signing documents. Bankers argue that there are loan programs that do not provide for changes in the repayment schedule. In such cases, the refinancing agreement makes no sense.
In addition, there are banks that impose a fee for early repayment of the loan and therefore these details need to be clarified. In 2011, the law prohibited the use of this method of calculating interest, but it still appears as one of the types of hidden commissions.
Is it possible to repay the loan in advance and what are the advantages of early repayment?
Early repayment of debt has many advantages. First, they relate to the debtor’s mental condition. When the borrowed amount is fully surrendered, it feels more comfortable and free. If you analyze payments, early repayment of the loan will automatically reduce the amount of the borrower’s principal debt by reducing the amount of accrued interest.
An important advantage of debt repayment is that the money saved can be invested in a profitable business rather than paying the bank. In most cases, early repayment of the loan is beneficial to customers, but not to banking institutions. In the event of early repayment loses extra interest on loans.
Until 2011, many banks generally provided various commissions and fines in large amounts for prepaid debit. Legislation has now improved loan conditions for borrowers, but there is still a moratorium on six months, a year or at least three months on early repayment. You can clarify the length of the ban in each bank in the loan agreement before repaying the loan in advance.
Consumer credit refinancing
Consumer loans are taken much less than larger debts for a period, but at the same time, they are not very beneficial for the family budget. You may have seen an interest rate on a loan that is much lower than your bank, which may trigger refinancing. It often decreases after some time.
This can be considered as a certain risk for the borrower who has borrowed the amount on less favorable terms. For example, your loan was issued by Privatbank. How to repay a loan in advance with this financial institution must be deducted in the credit agreement.
If it has the option of refinancing on more favorable terms, then only a standard package of documents is sufficient to reduce the interest rate. If you decide to take a new loan from another bank, you will need to collect additional documents.
Before you quickly repay a car loan, you must collect another package of documents that relate to the car and the current loan. This set of documents depends on the purpose of concluding a refinancing agreement.
If you are applying for a loan to buy another car, the contract procedure requires the sale of the first car in the passenger compartment. The proceeds will be an advance refinancing agreement. In any case, it is necessary to take out new insurance in which the beneficiary specifies another bank.
Get a loan from a bank to pay off your mortgage debt
This type of refinancing is considered to be the most complicated to implement, requiring the presence of additional documents relating to the property for which the loan was received, payments, loan balance, and other details.
In this case, it is necessary to conclude a new insurance contract identifying the new bank, to assess the property at this time and to re-register the property. Renewal of a new mortgage contract will result in additional significant costs, which will be justified under more favorable credit conditions only if the amount of the unpaid mortgage subject is high.
Additional package of documents and conditions for refinancing in other banks
Before repaying the loan by borrowing funds from another bank, it is necessary to collect additional documents for its execution. In addition to the standard package, you will need to collect certificates that characterize the current loan status to complete the transaction.
- Before paying a loan in advance to buy a property or a car by borrowing funds, it is necessary to submit a previously signed loan agreement.
- It is also necessary to prepare a repayment calendar with the amount of monthly mandatory payments.
- If other contracts (guarantee contract, collateral) have been concluded for the current loan, the original of these agreements must be submitted when registering a new loan.
- At the bank you owe the money, take the confirmation of the balance of the debt.
- If the refinancing is concluded in large quantities (listed in each bank), it will be necessary to additionally conclude a guarantee agreement for at least one individual.