This is a banking service that allows you to take out a new loan in order to fully or partially repay the old one. It is also called over-crediting.
It is most profitable to apply for refinancing when there is an opportunity to reduce the rate and reduce overpayment. This is especially true for borrowers with a loan for a large amount and a long term — for example, with a mortgage.
Refinancing is also useful when you want to replace several others with one loan, even if you took them from different banks. Then you will not be confused about the payment dates, and sometimes you will be able to reduce the total repayment period of the debt or the cost of monthly payments. But check in advance with the bank that offers refinancing, what is the maximum amount of debt it allows to re-credit.
In order for you to be approved for refinancing, it is important to be a careful payer. The chances that a borrower with a bad credit history, delinquencies and penalties will be given a new loan are extremely low. And if some bank agrees, the interest will probably be higher than on the debtor's current loan.
When financial difficulties arise, the first thing to do is to contact your bank and ask for debt restructuring — that is, to change the terms of the current loan agreement. For example, you can ask to convert debt from foreign currency into rubles or reduce the amount of payments by increasing the repayment period. Lenders often meet customers halfway — after all, they are also interested in you paying back the debt.
Sometimes a current loan is worth refinancing, even when payments do not cause problems. For example, if banks have started offering lower rates on new loans or you have the opportunity to apply for a preferential mortgage. With the help of refinancing, you can save on overpayment.
But first, contact your bank and tell us about your intentions. You may be offered to reduce the interest during the restructuring — it is usually easier to arrange it than refinancing. It happens that banks make concessions — sometimes it is more profitable for them to lower the rate than to lose a client who is ready to refinance a loan in another organization.
If your bank does not agree to change the terms of the contract, consider refinancing with different lenders. But keep in mind that re—crediting does not always help to save money - it is better to calculate in advance whether it will benefit your budget.
How to assess whether refinancing will be profitable?
To do this, you need to compare the amount of overpayment on the old and new loans.
View the payment schedule for the current loan — in your personal account on the bank's website, in the mobile application or in the loan agreement. Estimate how much you have already paid and what amount is still left to deposit.
If you have already repaid more than half of the loan, it is not a fact that refinancing will be justified even at a lower rate.
This is due to the fact that borrowers often repay the loan in equal payments (they are also called annuities). In this case, at the beginning of the loan term, most of the contributions go to pay interest, and the debt itself decreases slowly. And only in the middle of the schedule the situation changes — the interest is a smaller part of the contribution. As a result, the main overpayment occurs at the beginning of payments. When you apply for a new loan, you will again pay mainly interest in the first months.
But if less than half of the loan term has passed, refinancing can be very profitable.
When you refinance a mortgage, you need to take into account other expenses. For example, a new lender will probably demand to re-evaluate the mortgaged property and issue a new insurance. Specify in advance what additional services you will need and how much you will have to pay for them.
How to choose a bank for refinancing?
Sometimes you can re-credit in the same bank where you already have a debt that you want to refinance. But consider the proposals of other banks — it is possible that they will be more profitable.
The main thing is to be careful. On the Internet, re-crediting at a lower percentage is offered not only by banks, but also by scammers. They often pose as legal creditors in order to extort personal data and access to a bank account from people.
Before agreeing to favorable refinancing offers, you need to make sure that the organization has a license and you are on its official website.
When choosing a bank, pay attention to the following parameters:
The necessary information can be viewed on the bank's website, and the details can be clarified in a chat with an online assistant or by calling the hotline. Or visit the bank's office and find out everything right away on the spot.
After you decide on the bank, proceed to the paperwork for re-crediting.
Procedure for refinancing
The process consists of several stages.
1.Apply for refinancing
Check with the selected bank how this can be done. Usually, the application can be left directly on the bank's website — in the online questionnaire, you must specify the desired amount and the term of the new loan, your full name and contacts. Then a bank employee will contact you to discuss the details and set the date and time of the meeting at the bank branch.
Or you can immediately come to the bank with the documents and write an application on the spot. Just specify in advance what to bring with you. As a rule, you need a standard set of documents: an application form, a passport, a certificate of employment and income. Sometimes your previous lender's consent to refinance is required.
If you have a secured loan, such as a mortgage or a car loan, and the property is partially or completely owned by another person, you will need his permission to refinance. In the case when you have attracted guarantors, you will need to enlist their consent.
The bank will check the documents, examine your credit history, assess what loans and loans you already have, and conduct scoring. If the new lender is satisfied with everything, you will be approved for refinancing and offered a contract with new conditions.
2.Study the contract
By law, you have five days to carefully read the contract and weigh everything again — during this time, the terms of an already approved consumer loan cannot change. This rule does not apply to mortgage loans, but usually banks send the borrower a draft mortgage agreement in advance and give time to think.
3. Sign the documents
Sign the papers only if all the conditions are clear to you and they suit you. Do not hesitate to ask clarifying questions to a bank employee.
4. Pay off the old debt
It is most profitable to apply for refinancing when there is an opportunity to reduce the rate and reduce overpayment. This is especially true for borrowers with a loan for a large amount and a long term — for example, with a mortgage.
Refinancing is also useful when you want to replace several others with one loan, even if you took them from different banks. Then you will not be confused about the payment dates, and sometimes you will be able to reduce the total repayment period of the debt or the cost of monthly payments. But check in advance with the bank that offers refinancing, what is the maximum amount of debt it allows to re-credit.
In order for you to be approved for refinancing, it is important to be a careful payer. The chances that a borrower with a bad credit history, delinquencies and penalties will be given a new loan are extremely low. And if some bank agrees, the interest will probably be higher than on the debtor's current loan.
When financial difficulties arise, the first thing to do is to contact your bank and ask for debt restructuring — that is, to change the terms of the current loan agreement. For example, you can ask to convert debt from foreign currency into rubles or reduce the amount of payments by increasing the repayment period. Lenders often meet customers halfway — after all, they are also interested in you paying back the debt.
Sometimes a current loan is worth refinancing, even when payments do not cause problems. For example, if banks have started offering lower rates on new loans or you have the opportunity to apply for a preferential mortgage. With the help of refinancing, you can save on overpayment.
But first, contact your bank and tell us about your intentions. You may be offered to reduce the interest during the restructuring — it is usually easier to arrange it than refinancing. It happens that banks make concessions — sometimes it is more profitable for them to lower the rate than to lose a client who is ready to refinance a loan in another organization.
If your bank does not agree to change the terms of the contract, consider refinancing with different lenders. But keep in mind that re—crediting does not always help to save money - it is better to calculate in advance whether it will benefit your budget.
To do this, you need to compare the amount of overpayment on the old and new loans.
View the payment schedule for the current loan — in your personal account on the bank's website, in the mobile application or in the loan agreement. Estimate how much you have already paid and what amount is still left to deposit.
If you have already repaid more than half of the loan, it is not a fact that refinancing will be justified even at a lower rate.
This is due to the fact that borrowers often repay the loan in equal payments (they are also called annuities). In this case, at the beginning of the loan term, most of the contributions go to pay interest, and the debt itself decreases slowly. And only in the middle of the schedule the situation changes — the interest is a smaller part of the contribution. As a result, the main overpayment occurs at the beginning of payments. When you apply for a new loan, you will again pay mainly interest in the first months.
But if less than half of the loan term has passed, refinancing can be very profitable.
When you refinance a mortgage, you need to take into account other expenses. For example, a new lender will probably demand to re-evaluate the mortgaged property and issue a new insurance. Specify in advance what additional services you will need and how much you will have to pay for them.
How to choose a bank for refinancing?
Sometimes you can re-credit in the same bank where you already have a debt that you want to refinance. But consider the proposals of other banks — it is possible that they will be more profitable.
The main thing is to be careful. On the Internet, re-crediting at a lower percentage is offered not only by banks, but also by scammers. They often pose as legal creditors in order to extort personal data and access to a bank account from people.
Before agreeing to favorable refinancing offers, you need to make sure that the organization has a license and you are on its official website.
When choosing a bank, pay attention to the following parameters:
- Restrictions on the term and size of the new loan. For banks, refinancing is not charity. They earn from the interest you pay, so it is not profitable for them to refinance loans that are too small for a very short period. Usually banks also set the maximum amount and term of the loan.
- Interest on the new loan. Sometimes the bank indicates an attractive low rate in advertising, but in fact it is valid only for the first couple of months or under certain conditions. And when refinancing a mortgage, until you repay the previous loan and the collateral is reissued to a new bank, the rate may be even higher than on the previous loan. But usually it takes one to two months, and then the percentage decreases. As a rule, the refinancing rate depends on the amount and term of the loan. It may also be affected by the presence or absence of insurance, which you may be offered to issue together with a new loan agreement.
- The cost of insurance. The bank has the right to demand that you insure the mortgage or car loan collateral. Moreover, you will have to buy a new policy, even if the previous one has not ended yet — after all, another bank is indicated as the payee in it. But after early repayment of the previous loan, you can return some of the money for the already unnecessary old insurance. In other cases, the purchase of insurance is voluntary, but it is important to find out how the interest rate will change if you refuse the policy. Decide to insure yourself — keep in mind that you don't have to buy exactly the policy that the bank offers. The lender's website should list the companies whose insurance he accepts exactly, as well as the requirements for insurers and their policies — in case you decide to sign a contract with another company. Compare the conditions of different insurers and choose the best option.
- Additional expenses. When refinancing a mortgage, you most often have to pay a new real estate valuation, a state fee for reissuing a pledge in the Rosreestr, as well as a commission for transferring money to another bank. In the case of a car loan, you will also have to spend money and time on transferring the collateral to another bank. There may be other expenses waiting for you — be sure to check with the bank which ones.
- Requirements for the borrower. Each bank has its own. Almost all lenders are interested in the age, work experience, income level and payment discipline of the borrower. But the new bank's financial position requirements may be stricter than the old one. And if your income has fallen since the approval of the current loan, then the chances of getting a new one at a favorable interest decrease.
- A way to get money. If you apply for refinancing in your own bank, it will simply automatically repay the debt on the old loan at the expense of the new one — you only need to write such an order. When re—crediting in another organization, the details of the current credit account are most often required - the new bank will transfer the amount of your debt to it itself. Sometimes the bank can issue money in cash or open a credit or debit card for you and transfer the required amount to it. As a rule, while you pay off a new debt, the service of such cards is free. But it is better to clarify all commissions in advance, including for transfers, cash withdrawals, notifications of transactions. Find out if the conditions will change when you close the loan.
The necessary information can be viewed on the bank's website, and the details can be clarified in a chat with an online assistant or by calling the hotline. Or visit the bank's office and find out everything right away on the spot.
After you decide on the bank, proceed to the paperwork for re-crediting.
Procedure for refinancing
The process consists of several stages.
1.Apply for refinancing
Check with the selected bank how this can be done. Usually, the application can be left directly on the bank's website — in the online questionnaire, you must specify the desired amount and the term of the new loan, your full name and contacts. Then a bank employee will contact you to discuss the details and set the date and time of the meeting at the bank branch.
Or you can immediately come to the bank with the documents and write an application on the spot. Just specify in advance what to bring with you. As a rule, you need a standard set of documents: an application form, a passport, a certificate of employment and income. Sometimes your previous lender's consent to refinance is required.
If you have a secured loan, such as a mortgage or a car loan, and the property is partially or completely owned by another person, you will need his permission to refinance. In the case when you have attracted guarantors, you will need to enlist their consent.
The bank will check the documents, examine your credit history, assess what loans and loans you already have, and conduct scoring. If the new lender is satisfied with everything, you will be approved for refinancing and offered a contract with new conditions.
2.Study the contract
By law, you have five days to carefully read the contract and weigh everything again — during this time, the terms of an already approved consumer loan cannot change. This rule does not apply to mortgage loans, but usually banks send the borrower a draft mortgage agreement in advance and give time to think.
3. Sign the documents
Sign the papers only if all the conditions are clear to you and they suit you. Do not hesitate to ask clarifying questions to a bank employee.
4. Pay off the old debt
Submit an application to your former bank for early repayment of the loan in connection with refinancing. By law, you must notify the lender at least 30 days before the day of early repayment of the debt, but your contract may allow for a shorter period.
Many banks limit the maturity of the old loan — for example, they require you to close the old debt in the first couple of months of the new contract and monitor the situation, for example, according to your credit history. If you violate this condition, the bank may raise your rate or even demand that you immediately repay the loan with the accrued interest. Possible sanctions should be spelled out in the refinancing agreement.
After you pay off the debt, make sure that the loan is definitely closed — take a certificate from the previous bank that all your obligations to it have been fulfilled.
Now you will only have to pay off the new debt carefully. Follow the payment schedule and try to avoid delays.
Many banks limit the maturity of the old loan — for example, they require you to close the old debt in the first couple of months of the new contract and monitor the situation, for example, according to your credit history. If you violate this condition, the bank may raise your rate or even demand that you immediately repay the loan with the accrued interest. Possible sanctions should be spelled out in the refinancing agreement.
After you pay off the debt, make sure that the loan is definitely closed — take a certificate from the previous bank that all your obligations to it have been fulfilled.
Now you will only have to pay off the new debt carefully. Follow the payment schedule and try to avoid delays.