Refinancing loans from other banks

With the development of the banking sector in the country, the number of people who apply for a loan is growing every day. This helps to solve financial problems, get an education or buy your own home. But due to the worsening economic situation, many borrowers begin to experience financial difficulties, which gradually lead to late payments. Refinancing loans from other banks helps not only to avoid financial problems and a critical situation with a debt hole, but also to reduce the interest on the loan.

In this article, we will look at the peculiarity of the refinancing procedure and find out where which banks are offering such a service today.

According to statistics, today almost every tenth client who has taken out a loan applies for a refinancing service. This large figure testifies to the relevance of this banking instrument and makes us pay attention to it.

Refinancing is a banking instrument that allows you to get a new loan in order to repay the old one. When do people turn to such a program and how beneficial is it?

In fact, refinancing (or on-lending) is a new loan that is taken to pay off current debt. Banks today are increasingly beginning to develop such programs that, on the one hand, help clients to solve their financial difficulties, and on the other hand, attract new borrowers.

For whom is it more beneficial and does the refinancing procedure help reduce the cost of repaying the loan?

There are 2 types of refinancing:

external (current debt is covered by another bank);
internal (occurs within one bank).

How does refinancing work?

Of course, the procedure for refinancing a loan is not carried out by the bank out of good intentions.

Due to conscientious clients who are looking for ways out of a difficult situation, banks increase their base and replenish their loan portfolio. Before approving a loan application, any bank will. This is a very important criterion for selecting clients. Not a single organization will pay off a loan for which the client has already formed overdue payments, or had delays in the past.

This is checked quickly enough. Even if at the time of contacting another bank, the borrower has no current debt, this does not guarantee the approval of the application.

The late payment could have been several months ago, which lowered the client's credit rating and reduced his chances of getting the application approved.

It should be understood that all information about issued loans, loan amounts, schedules and maturities is stored in the Unified Bureau of Credit Histories.

The Russian Bureau of Credit Histories (abbreviated as RBKI) is an organization created to systematize the credit histories of all borrowers for banks, leasing and insurance companies, credit cooperatives and organizations. RBKI has the most complete and up-to-date information on all clients, which is constantly being added and updated.

Before contacting another bank for a refinancing service, it will not be superfluous to find out your credit rating in this Bureau and estimate the chances in advance. The fact is that every refusal of another bank is also recorded in your history. In the future, the chances of getting a new loan will decrease even more, because the bank will see that you have repeatedly received refusals from other financial institutions in the past.

What is the point for a bank to take such a financial risk and conclude an agreement with a client who could become a potential defaulter?

Does this mean that having once compromised his impeccable credit reputation, the client can no longer count on the next loans?

Of course, each bank independently determines the filtering algorithm for clients with "bad" credit history. A client who took 100 thousand rubles from the bank and stopped paying for the fourth month will not be on the same line with the borrower who has been repaying the loan in a disciplined manner for several years and has made a delayed payment only a few times.

How does the refinancing procedure take place?

The scheme is quite simple and straightforward.

The client collects a package of documents for a new loan, fills out an application for refinancing and applies to Bank No. 2.
Bank No. 2 (to which the client applies) considers the application and makes a decision.
In case of a positive decision, Bank # 2 pays the entire debt to Bank # 1 (in which the client has a current loan). In this case, the client is obliged to notify Bank No. 1 of his decision to repay the loan ahead of schedule. In this case, the Lender's consent is not required, but, according to the terms of the agreement, the client is obliged to notify of his decision in advance (the specific period is specified in the agreement). The specialist of Bank No. 1 must issue a certificate, which reflects the amount until the full repayment of the loan as of the current date.
On the day of the transaction, the client signs a new agreement with Bank # 2. Bank # 1 issues the borrower with a certificate of full repayment of the loan. The borrower shows this certificate to Bank No. 2 in order to confirm the intended use of money under the refinancing program.

Thus, the borrower has an opportunity, on more lenient terms, to start the repayment program to Bank No. 2 (which has completed the refinancing procedure).

When considering your application in a new bank, analysts will carefully check loan delinquencies and documents confirming income. It will be possible to take a new loan to cover the existing debt only if there are no delays.

What loans are subject to refinancing?

Several types of loans are subject to refinancing:

mortgage;
auto lending;
targeted loans (goods);
cash loan.

A particular 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.

It also makes sense to resort to this service if the borrower has collected several loan products with different repayment schedules. One large loan, issued in another bank, can be used to repay several products at once (card, mortgage, consumer loan). In this case, you can even win at the interest rate.

Why does a borrower need refinancing?

In order to understand the purpose and features of refinancing, let's see why the borrower needs it? Financial experts point out several factors that lead clients to a refinancing decision.

For a refinancing service, a client can apply to a bank in three cases:

Sometimes the impulsiveness of signing a contract, without a desire to delve into the subtleties, numbers and hidden commissions, leads to the fact that the client takes on financial obligations, which he either cannot fulfill after a while, or realizes that he received a loan on unfavorable terms. As a result, after a short time, the borrower realizes the full severity of the credit burden and his own insolvency in repayment.

Not everyone is able to get a loan on favorable terms, and sometimes this fact comes after a few months. You cannot terminate the loan agreement, but you can change its terms.

Of course, no bank will agree to change the current terms of the agreement by offering a lower interest rate. In this case, the refinancing procedure will help.

For some clients, this is the only possible chance to improve their financial position without ruining their credit history and not ending up in the penalty box.

When is it profitable to refinance?

In what situations is it advisable for a client to apply for a refinancing service to another bank?

it is necessary to reduce the financial burden and increase the loan term;
desire to change the currency under the agreement;
more favorable interest rates in another bank;
it is necessary to remove the arrest from the pledged property;
changing the payment schedule scheme (from an annuity to a differentiated scheme);
consolidation of loan products.

Let's now consider the appropriateness of each case for refinancing.

Decrease in interest rates.

As for more favorable conditions and a reduced interest rate from another bank, you need to be very careful here. According to financial experts, there is sense in refinancing by other banks under more favorable conditions only when the interest rate is at least 2% lower.

In other cases, a new loan agreement may seem like a lifeline only at first glance. In fact, it will drag you into financial problems even deeper, or it will take a lot of time, nerves, and in fact, will not reduce the financial burden.

You should not resort to the refinancing procedure if there are several months left before the payment of the full debt, 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.

If we are talking about a long period of the contract (for example, a mortgage loan), then reducing the rate even by 1% will significantly save money.

Therefore, having such a loan from a bank, it will not be superfluous to periodically find out the terms of lending in other financial organizations.

Increasing the loan term.

As for a significant increase in the loan term in order to reduce the financial burden, you should be very careful here.

Refinancing of this type was in great demand at the end of the 2000s, when the dollar rose sharply and many borrowers were on the verge of a financial collapse.

It is advisable to resort to this option if there is an unstable financial situation on the market, the rate increases, and the borrower receives the main income in rubles. Financial experts, in principle, recommend taking a loan in the currency in which the client receives the main income.

When applying for a refinancing service, it should be understood that another bank will refinance at the current rate, which will automatically increase the loan amount. But on the other hand, it will help stabilize the situation and avoid troubles with late payments in the future.

The difference between refinancing and loan restructuring

The main purpose of the loan restructuring is to change the terms of the agreement, the purpose of which is to reduce the financial burden. In fact, the contract is not closed, but its terms are changed. An increase in the term of the loan agreement reduces the amount of the monthly payment, so that the borrower is able to gradually pay off the debt.

Unlike refinancing, restructuring is carried out by the same bank in which the borrower issued a loan and, as a rule, the change in conditions is not associated with a change in the interest rate.

Some people confuse refinancing with restructuring, which actually means re-issuing the current loan to a “softer” one for the client.

By agreeing to this procedure, the bank makes certain concessions to a client who is currently in a difficult financial situation and cannot fulfill its financial obligations under the contract. But at the same time, the benefits of the bank are quite obvious.

Firstly, the term of the agreement increases, which means that the bank will receive a large profit on paying commissions and interest.

And secondly, the client will gradually pay all the debt instead of going to court.

What do you need to refinance?

Registration of the service provides for the provision of a full package of documents, as in the case of standard loans.

To take a new loan, you will need the following package of documents:

passport;
identification code;
documents of guarantors (if any are indicated in the contract);
a copy of the work book;
income statement ((2NDFL);
loan agreement (current);
completed refinancing application;
receipts for payment of the current loan;
certificate from the bank about the current debt.

In addition to this standard package, some banks may require additional documents.

The situation with refinancing loans in Russian banks is very different. Some banks provide for on-lending loans for their own clients. Other financial institutions offer to refinance loans issued by other companies.

In what case can a credit institution refuse? If, when reviewing all documents and checking credit history, the bank will doubt its solvency.

What to look for before signing a contract?

Before contacting another bank for a refinancing service, you need to study the following points:

Step-by-step instructions for obtaining refinancing

Advantages and disadvantages of refinancing loans from other banks

Today, many clients have already managed to use the refinancing service of other banks, having appreciated the advantages of this product.

Pros:

the possibility of changing the interest rate to a more profitable one;
the ability to remove an unbearable financial burden by extending the term of the loan agreement;
you can get an amount sufficient to pay off the mortgage in order to withdraw the pledged property from arrest;
consolidation of several loans;
change in the structure of the repayment schedule (transition from an annuity to a differentiated scheme).
the possibility of changing the base currency under the agreement.

But, despite the visible advantages of the refinancing procedure, one cannot fail to note some disadvantages.

Minuses:

the procedure will require re-collection of documents, which entails a loss of time;
many banks charge additional fees;
additional expenses (notary, legal advice, etc.)
the terms of the new loan agreement may impose more stringent requirements on the borrower.

Which banks are refinancing?

Carries out the refinancing procedure for legal entities and individuals, offering on-lending programs for car loans, cash, cards, consumer loans.

Consumer loan refinancing amount - up to 1,000,000 rubles.

Interest rate - 13.9%

Term - up to 5 years.

Special conditions: the term of the current contract is at least 6 months. At least 3 months before closing the contract.

Loan amount - at least 200 thousand rubles.

Interest rate - up to 15%

Term - up to 7 years.

Special conditions: the possibility of closing up to three current loans with one loan. The term of the current contract is at least 6 months. At least 3 months before closing the contract.

The application is considered up to 5 working days.

VTB Bank 24

The maximum loan amount is 3 million rubles.

The interest rate is 15%.

Term - up to 5 years.

Requirement for the client - official employment, 18-65 years old.

Special conditions: the possibility of closing with one loan up to 6 credits.

VTB Bank has 100% approval of refinancing applications if the borrower has not missed the loan repayment date for the last 12 months.

The application is considered up to 4 working days.

Refinancing amount - up to. The bank does not carry out on-lending for foreign currency loans.

Interest rate - from 16.5 to 25%. The interest rate depends on the amount.

The term is from 1 to 7 years.

Requirement for the client - official employment, 21-65 years old.

Special conditions: work experience at the last place of work - at least 6 months. A prerequisite is an ideal credit history and no overdue payments over the past 12 months.

The application is considered up to 4 working days.

Rosselkhozbank

Carries out the refinancing procedure for 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 on the basis of the real state of affairs.

Alfa Bank works mainly with large loans (auto, mortgage). Due to the long term of crediting, they are the most attractive for the bank. The approval of the application will depend on the remaining loan term and the amount owed.

The amount of loan refinancing - from 600 thousand rubles.

Interest rate - from 13.5.

Term - up to 5 years.

Home Credit Bank.

This bank is distinguished by its special loyalty to customers, even those with late payments.

The maximum loan amount is up to RUB 500,000.

Interest rate - 19.9% (the same for all borrowers).

Term - up to 60 months.

Requirement for the client - official employment, 21-65 years old.

Application consideration time - up to 5 working days.

Almost any loan (auto loans, mortgage, credit card) can be closed with a new loan.

It is impossible to unequivocally answer the question in which of the banks it is more profitable to refinance a loan. It all depends on the amount of the remaining debt and on the type of loan.

For example, with a mortgage, it is better to go to Alfa-Bank or Sberbank of Russia. A cash or consumer loan can be closed with the help of such banks as VTB24, Rosselkhoz Bank, Home Credit.

Video. Mortgage refinancing

Conclusion

Refinancing is a rather profitable and relevant service that allows you to get a new loan in order to repay the old one. At the same time, the terms of the new loan agreement may be more lenient. If the borrower has financial difficulties that do not allow to pay off the current debt in the usual rhythm, then this service can help to avoid late payments. It will also help keep your credit history positive.

According to financial experts, only a new loan will help to get out of the financial crisis, the annual rate of which will be at least 2% lower than the existing one. In other cases, the refinancing service may seem like a lifeline only at first glance. In fact, it will pull you even deeper into debt or simply take time.

Modern resources allow you to independently monitor bank offers, comparing refinancing programs and choosing the most optimal one for yourself.