If you were able to think about taking out a loan, you probably had some doubts about whether it was the right time ? What if after a while the market interest rate changes? You can turn the changes in market conditions to your advantage as banks have included in their offer loans for refinancing of existing liabilities.
In this blog post, we will try to get you closer to what you need to pay attention to when deciding on a loan refinance to ensure more favorable repayment terms for your financial obligations.
How loan refinancing works?
You do not have to be granted a loan at the same financial institution where your obligations arose
Loan refinancing works by granting you a new loan with a more favorable interest rate. This type of loan gives you the ability to consolidate all your previous financial liabilities into one loan that you repay in monthly annuities. An important aspect of this type of lending is that the loan does not have to be approved by the same financial institution where your liabilities originated, but you can choose for yourself the most favorable option offered on the market at that moment.
The main reason for the decision to refinance the loan is to reduce the total interest you will pay on the loan amount . In addition, one of the benefits is that, in addition to your own, you can include other household members’ obligations in the all-purpose refinancing loan, thus providing additional money savings.
Refinancing of current liabilities
The interest rate for refinancing loans is usually much lower than for overdrafts and cards over the longer term.
In addition to the most commonly used home and cash loan commitments, you can also include leasing obligations, overdrafts and credit cards, as well as other financial liabilities in the refinancing loan. Refinancing a large number of past due liabilities is very profitable in the event that you have not been able to settle them within a short period of time. The interest rate for refinancing loans is usually much lower than for overdrafts and cards over the longer term. However, this should be approached with great caution.
Only a fundamental change in your financial habits in the long run leads to the proper management of personal finances. Keep in mind that in addition to the new monthly installment repayment rate, you do not start using the overdraft facility again to an extent that you cannot control. You can read more about using the overdraft properly in this article about overdrafts.
What effects you can achieve by refinancing your liabilities?
As stated earlier, the goal of taking an all-purpose refinancing loan is first and foremost to reduce the total amount of interest you will pay on the borrowed amount. A lower interest rate allows you to decide between:
- refinancing with the aim of reducing the monthly annuity with the same repayment period in relation to existing financial liabilities,
- refinancing with a view to a shorter repayment period , less reduction, retention or increase of the current monthly annuity,
- refinancing your existing liabilities with an additional amount of cash according to your current needs, with a lower interest rate and approximately the same annuity amount.
In addition, you can replace a variable rate loan with a refinancing loan with a fixed rate loan.
How to begin the process of refinancing your liabilities?
To get started with the whole process, you need the following information:
- See how much your bank charges for early termination of the loan and on what terms it allows.
- it is advisable to keep an eye on current market interest rates to see how much your refinancing is worth at a given time.
Our help throughout the process comes without any obligation on your part.
If you need assistance in understanding your financial situation and the cost-effectiveness of refinancing your liabilities, you can contact us for assistance by filling out the form on our site. You can also contact us at your nearest branch. Our financial advisers are always ready to help you calculate the savings you can make by refinancing your liabilities and choosing the right option for your needs. Our help throughout the process comes without any obligation on your part.
Combining all your monthly financial obligations into one can be a very good idea that gives you extra space in planning your home budget. Still, a little caution before any entry into a loan arrangement is out of the question. Make sure you ask your bank for a credit card that suits your needs. It must show the repayment period, the effective interest rate, and the total amount of interest you will pay over the entire period.