Refinancing (kredīta refinansēšana) is the financial service offered by banks and many non-banking credit organizations. It means that you get a new loan used to pay out previous debts. This may become necessary if the borrower is facing financial problems and cannot carry out the obligations by previous provisions as a result of economic recession, loss of function, etc. The decision on refinancing is taken individually after the credit organization specialists carefully examine each borrower’s case and come to a verdict.
Why is refinancing becoming advantageous?
When talking about benefits, we mean that in the process of refinancing the terms of the loan become more loyal and favorable for the borrower, i.e. banks or other organizations make concessions. A borrower, who is facing a difficult situation, is offered other, more beneficial, interest rates and terms of payment.
Refinancing also allows you to join all the payments so that you won’t mix up the dates and will significantly lower the risk of a late payment and, consequently, of a fine. However, in order to get the refinancing approved, the client must have a good credit history. If you are chronically in debt, your chances of refinancing are very low.
And yes, there are advantages for both parties. What’s the creditor’s benefit? At least, it is the chance to get their money back. Legal proceedings, sales of debt to other companies, etc., are very time and money-consuming, whereas the way of refinancing is much shorter. If it is another company that offers refinancing, they get a chance to obtain a new client.
How to assess the benefits of refinancing?
Here is what you need to do:
- Compare payment schedules and terms for old and new agreements. It is worth going for refinancing if you have paid less than half of your debts.
- Have a look at refinancing offers not only from your bank but from other organizations as well. Compare the terms.
- Find out the interest rate for the whole period. Creditors often promise low rates when advertising; however, in reality, these are only rates for one or two payments and later you’ll have to pay more.
- Sometimes, banks offer you larger amounts than necessary to cover your debt and suggest spending the rest as consumer credit, etc. Remember, the larger amount you are offered, the more you pay in the long term.
If a legal body needs refinancing under favorable terms, we suggest considering the Incredit company. You can leave an application at the organization’s website or one of its Latvian credit centers.
