credit card refinancing

Credit debt is a common situation that everyone can face. It is good if a person can repay the interest and the loan body every month. However, if there is no such possibility, it is reasonable to draw up a debt payoff plan and learn about possible methods that will help to cope with the debt more easily.

Refinancing (re-crediting) is a new loan to repay existing debt but on more favorable terms. It is also possible to combine all loans from different financial institutions. 

What are the advantages of credit card refinancing?

Re-crediting has several undeniable advantages for the borrower:

  • reduction of the interest rate on the loan;
  • extension of the repayment period;
  • reducing the amount of the monthly payment.

Refinancing is beneficial if the client takes a significant amount for a long period. Even a slight decrease in the rate will be a tangible help to the budget. 

It is worth carefully calculating the benefits before getting a loan to cover the debt. Consider that early termination of the agreement with the previous bank may involve payment of a penalty. If the loan amount is large, the penalty will also be significant. If the loan was issued against a pledge, then during refinancing, the debt for some time will not be secured by anything, due to which there will be high interest.   

There are two concepts: restructuring and refinancing. It would be best if you understood them before deciding to re-loan.

Restructuring is a reduction in the loan rate, term, or repayment amount. For example, having told about the circumstances, the client can ask the bank to ease the terms and replace them with the conditions that will be most convenient, taking into account the current situation of the debtor.

Refinancing involves drawing up a new contract with a change in its participants. The lending bank, which issued the loan, can perform the refinancing procedure, but it is not profitable. It means getting a new loan from another bank is possible.

Who can get a refinancing?

Refinancing implies the same conditions as getting a simple loan. The client must be a reliable borrower, meaning he should be solvent and have a stable income. Work experience and positive credit history play an important role. The presence of movable and immovable property is also considered.

Credit card refinancing procedure

First, you need to check with the bank whether it is ready to close the loan early and whether it allows you to transfer it to another financial institution. After that, you must come to another bank and bring a package of documents, including a statement of income and property documents. Some financial institutions may request a foreign passport. After the conclusion of the agreement, the bank independently settles with the previous financial institution. 

Loan consolidation

Loan consolidation is the combining of several loans into one. This way, the debt repayment period is extended, but it is not a prolongation. Several loan payments are combined into one. In this case, its size is smaller, and the repayment period increases. Previously obtained loans are covered using a new one. Consolidation is similar to refinancing but allows you to re-credit not one but several debts, including online loans.

Consolidation allows you to get rid of small loans and get one loan with a longer term. Many debtors can avoid obsessive thoughts about all the existing loans they constantly need to pay interest. If a person has one loan instead of five, it significantly reduces the psycho-emotional load.      

Types of consolidation

The market offers two options for consolidation:

  1. Secured by real estate and other property.
  2. Loan without collateral.

By the names, it is clear that secured consolidation loans involve large sums. In most cases, lenders are open to work on debts of different kinds. In doing so, they put individualized conditions to consolidate each client's debts. The offers that will come from the lenders will not always meet the expectations of the clients.     

Consolidation is a procedure that is not always provided to everyone. The borrower must have enough income and a good credit history to receive a favorable response from the financial institution. It is important to realize that consolidation loans can be on worse terms than earlier. Before taking such a step, you should carefully calculate income and expenses and analyze the number of payments and their cost.

As an option, you can try to repay the smallest credit obligations first and make a re-loan for a large debt. It is possible, for example, to extend the contract. If the amount of interest for each month exceeds the borrower's capabilities, consolidation will be the right solution. You need to collect a package of documents stipulated by a particular financial company to complete the consolidation.