Which banks do loan refinancing
During the economic crisis, people are increasingly interested in the possibility of obtaining a loan in another bank to pay off current debt. Such an operation is called refinancing and involves opening a new loan in order to pay off existing debt. Which banks do loan refinancing, and how does this process take place?
In some cases, refinancing a loan is the only way for a client not to fall into a debt trap, out of which the level of income today does not allow.
Reasons for applying for refinancing
When can refinancing a loan help solve financial problems?
Many clients who find themselves in a difficult financial situation, when there is no way to pay off the loan, and the penalty is growing every day, simply cannot find a way out of this situation.
This occurs for two reasons:
- The family's income dropped sharply. Taking a loan, the client was counting on the usual amount of monthly income and built a refund scheme for himself. But dismissal from work, change of activity and other moments jeopardized the financial situation of the family.
- When signing the agreement, the borrower did not pay attention to hidden commissions, insurance premiums, penalties. All this increased the amount of the monthly fee, making it unaffordable, which led to financial problems.
- The borrower did not assess his real ability to repay the loan and after a while realized the unbearable amount of monthly payments for the budget.
Thus, the on-lending process will be relevant only if the borrower accumulates an amount of debt that he cannot fully repay at the moment.
It takes him more time to pay the borrowed funds.
Several types of loan products are subject to the refinancing procedure:
- mortgage;
- auto lending;
- targeted loans (goods);
- cash loan.
A special expediency of refinancing is made by credit programs, the maturity of which is over three years. This makes it possible to significantly facilitate the debt repayment scheme.
In the case of a mortgage, when the loan term is several decades, a decrease in the interest rate even by 0.5% -1% will significantly affect the final amount.
The essence of loan refinancing
Refinancing helps the borrower to close all debts on previously issued loans. Such a program can be offered both by the Lender himself (the bank in which the current loan is issued), and by any other financial institution.
Bank No. 1 (to which the client applies for a refinancing service) pays the amount of the remaining debt to Bank No. 2 (in which the client has a current loan).
Thus, the client has an opportunity, on more lenient terms, to start a repayment program for Bank No. 1 (which has made refinancing).
Refinancing can take place within one organization (internal refinancing) and in different banks (external).
It should be understood that the bank does not go to the on-lending procedure out of good intentions and not out of a desire to save you from debt.
By signing a new agreement with the borrower, the organization in any case will return the amount of money issued at interest. At the same time, the extended loan period will bring new interest.
Also, due to conscientious clients who are looking for ways out of a difficult situation, banks increase their base and replenish their loan portfolio. Borrowers with bad credit are not eligible. What is the point of replenishing your database with unscrupulous payers?
It will be possible to take out a loan to cover another loan only if there are no delays in payments.
Moreover, the registration of the service provides for the provision of a full package of documents, as in the case of standard loans.
Video. Refinancing loans
To take a new loan, you will need the following package of documents:
- the passport;
- a copy of the work book;
- income statement ((2NDFL);
- loan agreement (current) and others.
When should you apply for refinancing?
In what case can the Bank refuse to provide a refinancing service to a client? In the event that the borrower has more than three current loans, for which there are already delays. And also if the client has a bad credit history.
When is it advisable to apply for the on-lending service to another bank?
- You need to increase the loan term due to financial difficulties.
- Conversion. You want to change the currency of the loan agreement. Let's say you took out a loan in euros, but at the current exchange rate, you simply cannot "pull" this amount and you need to change the loan term in order to reduce the amount of the monthly installment.
- The bank is currently offering lower interest rates on the loan.
- It is possible to remove the encumbrance from the pledged property so that it is possible to dispose of the pledged item.
- You are switching to a loan program with payment for the remaining amount of the debt, and not in equal installments (annuity).
- Consolidation of loan products. You have 3-5 loans open in the bank and it is difficult for you to keep track of the repayment schedule and payment dates. Combining all products into one will significantly save time and make the loan repayment percentage more comfortable.
- More than a year is left until the end of the loan agreement.
To pull out of the debt hole, according to financial experts, can only be a program in which the interest rate will be at least 2% lower.
In other cases, a new loan agreement may seem like a lifeline only at first glance. In fact, it will pull you even deeper into financial problems.
You should not resort to the refinancing procedure if there are several months left before the full debt is paid, since the amount of time that will have to be spent on completing a new transaction will not be compensated by a reward in the difference in interest rates.
How to apply for refinancing?
The on-lending procedure practically does not differ from the procedure for obtaining a standard loan.
- You need to find out if the current bank provides a similar service. If not, find out the possibility and conditions of refinancing in other financial institutions.
- Choose the optimal refinancing program in another bank. Check the list of documents required for the refinancing service itself and for opening a new loan.
Like any banking service, refinancing has its advantages and disadvantages.
Pros:
- An opportunity to get out of a difficult financial situation.
- Reducing the interest rate under the new program.
- Increasing the loan term.
- Consolidation of loan products.
- Possibility to remove the encumbrance from the pledged property.
- Changing the structure of the repayment schedule (switching from the annuity rate to the balance).
Minuses:
- The complexity of the procedure and the need to collect a large package of documents again.
- The need to pay bank charges to the new bank.
- Additional expenses (notary, legal advice, etc.).
You also need to take into account the term of the current loan. If you have already paid more than 60-70%, then the refinancing procedure is unlikely to ease your financial situation. Since most of the interest on the loan has already been paid and now you are already paying the body of the loan.
If the bank refuses the refinancing procedure, you can connect additional instruments that have a positive effect on the decision of credit institutions.
First, you can enlist the support of the Guarantor, who will be a close relative or colleague. The presence of a Guarantor is a green light for many banks.
Secondly, if you have several loans, you can concentrate all your financial efforts on closing 1-2. Then the bank will reconsider its attitude to your situation and, possibly, take a positive decision.
But risking real estate by giving it as collateral against a new loan is not worth it.
Although the interest rate for these types of credit programs is much lower (this is due to the absence of risks for the bank), there is a high probability of being left homeless.
If you have weighed all the pros and cons of the refinancing procedure, having made a decision for yourself to apply for such a service, the rating of Russian banks conducting on-lending will help you decide where to take a new loan.
Rating of 5 Russian banks refinancing for 2017
MDM Bank.
Carries out the refinancing procedure for legal entities and individuals, offering on-lending programs for car loans, cash, cards, consumer loans.
The amount of refinancing a consumer loan is from 10 thousand rubles to 1,000,000 rubles.
The term is from 2 to 7 years.
Requirement for the client - official employment, 21-65 years old.
Special conditions: minimum balance of debt - at least 10 thousand rubles, uninterrupted work experience at the last place of work - at least 4 months.
Knoxbank.
The amount of refinancing a consumer loan is from 10 thousand rubles to 500,000 rubles.
Knoxbank
Interest rate - from 10 to 15%
Term - from 1 to 30 years.
Requirement for the client - official employment, 21-65 years old.
Special conditions: a pledge of real estate is required, work experience at the last place of work - at least 6 months, no current overdue debt.
It should be noted the low percentage of approval of on-lending in this bank, which is associated with the low interest rate.
- VTB Bank of Moscow.
VTB Bank of Moscow
The amount of refinancing a consumer loan is from 100 thousand rubles to 3,000,000 rubles.
Interest rate - from 14.9%
Term - up to 7 years.
Special conditions: the possibility of taking a credit vacation after paying the debt within three months.
B&N Bank.
The amount of refinancing a consumer loan is from 10 thousand rubles to 1,000,000 rubles. The bank does not carry out on-lending for foreign currency loans.
B&N Bank of Russia
Interest rate - from 13.3 to 24.5%
The term is from 1 to 7 years.
Requirement for the client - official employment, 18-65 years old.
Special conditions: work experience at the last place of work - at least 4 months, the term of the current contract - at least 6 months, no delays and the presence of payments for three periods. A surety and collateral are not required.
Carries out the procedure for refinancing legal entities and individuals in rubles and foreign currency, offering on-lending programs for car loans, cash, cards, consumer loans.
The amount of refinancing a consumer loan is from 100 thousand rubles to 1,000,000 rubles.
Interest rate - from 13.5 to 15%
The term is from 1 to 5 years.
For on-lending over 500 thousand rubles, a Guarantor (individual) is required.
The requirement for the client is 23-65 years old, 2-NDFL or 3-NDFL.
Special conditions: the minimum balance of debt is at least 10 thousand rubles, a pledge of liquid property is required. The loan approval percentage is above average, however, the credit history in this organization should not be damaged.
Please note that all banks set minimum and maximum lending rates. It depends on many factors: the amount of the loan, the term, the category of the borrower. Therefore, when choosing the most profitable refinancing program for yourself, ask the manager to calculate your personal rate based on the real state of affairs during the consultation.
Conclusion
Summing up, I would like to note that refinancing is not a panacea.
Such a financial procedure does not save the borrower from paying the debt, but only allows the loan term to be extended without penalties.
Before resorting to such a service, carefully study the terms of the new bank and study all the nuances spelled out in the "small print" in the agreement. Perhaps there are additional commissions, severe penalties and insurance premiums that will outweigh the initial benefits of a new loan.