Loans are an integral part of our lives. It’s hard to find a person who has never taken Loan for one reason or another. People pay for mortgages, go on vacation, buy modern equipment. Taking Loan allows anyone to get the desired product or service here and now. What do we do, however, if we already have Loans from several banks, each with its own rates, terms and commissions, and we urgently need a certain amount of money to solve an urgent problem? In this situation, help comes a useful financial instrument, known as Loan refinancing, which allows avoiding the trouble of taking the next bank loan.
Loan refinancing means making a new loan to repay old liabilities. Refinancing is a target loan – for this reason, the contract with one bank will indicate that the money will go to repay an existing debt to another Loan institution.
In which cases can the client resort to Loan refinancing? The typical situation is the change in market conditions and the decrease in interest rates on loans. Suppose you took a mortgage in 2005 and then the interest rate was 20%. You have paid the mortgage for 10 years, but for some reason you have unexpectedly realized that in another bank the annual interest rate is only 15%. Because you have to pay the mortgage for another 10 years, then you go to that other bank and renegotiate your mortgage contract. There is a receipt of refinancing – the money from your new bank will go to repay your debt to the old one.