What is a refinancing loan?
Are you a borrower? Or are you just planning to take out a loan? In both cases, it’s worth expanding your knowledge of banking terminology. Today we will present you with another, important from the point of view of customers, refinancing loan.
Refinancing loan – definition
What is loan refinancing? A refinancing loan is provided by bank B to settle a loan serviced by bank A, usually a mortgage. What does it result? Instead of paying off your liability at Bank A, you will pay it back at Bank B. Refinancing your mortgage can be of particular importance. Why? The mortgage loan is granted for a dozen / dozen years. During this time, the market situation has a chance to change radically and the terms of the “old” loan often cease to be satisfactory.
However, it is also possible, among other things, to refinance a cash loan as well as to refinance a car loan. It is worth remembering that it is the bank that must agree to refinance a specific obligation. Note – refinancing and consolidation loans are not the same!
Credit refinancing: when?
We already know what a mortgage refinancing loan is etc. When can refinancing a loan be a reasonable solution? Even if the borrower has a chance to receive better, more competitive credit terms. In addition, refinancing loans can be helpful when the borrower gets into financial trouble and is unable to pay his current liabilities any further.
Credit refinancing: what is worth paying attention to?
Before you decide on a refinancing loan, think carefully about whether such an option is profitable at all and carefully analyze the available proposals in the context of their profitability. What, among other things, is good to keep in mind? Own needs: what do we expect from a refinanced loan and what do we care about the most?
In addition, remember to compare the repayment terms of the existing loan and refinancing loan and to compare the total costs of both loans. Let’s not forget that refinancing a loan can be associated with additional costs, for example in the form of a commission that the customer will have to pay to the bank. Obviously, these are not all the issues that should be considered before we decide to apply for a refinancing loan.
SUMMARY: we already know what a refinancing loan is. However, let’s not treat it as a universal remedy for our problems with repayment of the existing commitment, quite the opposite, let’s think carefully whether in our situation the conversion of one loan into another will be justified and carefully analyze the available offers.