Loan refinancing is a popular service that is beneficial to both banks and borrowers. In this article, we explain the essence of this procedure and how you can refinance loans to improve the terms.
What is the essence of refinancing?
This service allows you to apply for a new loan to close an old loan or several credit products at once in other banks. The bank's benefit is to attract a reliable and creditworthy client. The borrower's benefit is provided by attractive lending terms. As a rule, the interest rate is reduced and the monthly payment is reduced.
In essence, refinancing (recrediting) is a targeted loan, i.e. funds are allocated for a specific purpose. But many banking programs allow you to receive a larger amount than is required to close loans in other credit institutions.
Under the terms of refinancing, the client is obliged to repay list of mobile number database specific loans within the established period. If he does not do this, the lending becomes less profitable: failure to fulfill obligations entails an increase in the interest rate.
The difference between refinancing and restructuring
These two procedures serve the same purpose: to reduce the borrower's debt burden. But they are used in different situations, and the mechanisms themselves are different.
The essence of refinancing is opening a new credit product and closing the old one. In this case, the bank is most often changed. There are ways to refinance a loan in the current bank, but most often you need to wait for a personal offer.
The essence of restructuring is changing the initial terms of a specific loan. This service is provided in situations where the borrower has financial difficulties (for example, loss of a job, health problems) and cannot pay the bank the amount specified in the agreement. If the borrower proves that he really has difficulties with payments, the bank may meet him halfway and change the terms.