When signing the loan agreement, the bank’s clients are convinced that they will be able to pay back the given liability. However, sometimes it turns out that the loan installment is too high and, unfortunately, what we were sure is not so simple and repayment becomes a problem. In this case, it is worth looking around refinancing your loan.
Refinancing loan – what is that?
A refinancing loan is a type of bank loan for repayment of previously drawn loans. It provides more favorable repayment terms, such as installment or interest rate, than in the previous commitment. This is a good solution for borrowers who want to reduce the burden of obligations already incurred.
A refinancing loan is often confused with a consolidation loan. However, these are two different loans.
A consolidation loan is most often used to combine its liabilities – various types of loans – into one liability with a lower monthly load than the total resulting from many previous debts.
On the other hand, a refinancing loan is a solution that allows you to transfer liabilities from one financial institution to another, which offers better repayment terms.
How to choose a refinancing loan
The refinancing loan is primarily for people with a mortgage. However, before we decide to change it is worth first to calmly analyze the current loan agreement and compare it with other offers.
First of all, one should compare the margins of financial institutions and various types of commissions. These are components of the loan price that are negotiable. Even if the terms of the contract were competitive at the time the contract was signed, this does not mean that no better proposals may appear within a few years.
The basic selection criterion should be a reduction in the monthly loan installment. Mortgages have been taken for many years, so many factors that can affect better credit conditions can change during this time. In such a long time and usually high amounts of debt, it is enough that under the terms of the refinancing loan the interest rate is reduced by even one percentage point to reduce the monthly installment by up to several hundred zlotys. When multiplied by the number of months to complete the loan repayment, a lot of extra money can accumulate.
To sum up, a refinancing loan is a good solution for all customers who are looking for savings at every level of the home budget, or rather most of us strive to save as much as possible.