Refinancing is a way to reissue a loan agreement at another bank on more favorable terms. The purpose of refinancing for the client is to reduce the annual interest rate, and, as a result, credit overpayment, decrease the monthly payment by increasing the term of the contract, more convenient service (cash desk, free repayment methods). For a banking organization, the benefit is obvious: they get a new customer. The service itself is not much different from issuing a loan. But there are some peculiarities. Let’s look at how to use this service and what documents are needed to refinance a loan.
At any stage, under certain conditions, the borrower may apply to any commercial bank with the request of refinancing its existing loan. At the same time, it is possible to combine several contracts into one. For example, you have an agreement with VTB 24 and the Agricultural Bank. You have the right to refinance both loan agreements by combining them into one, for example, in Sberbank.
On the basis of refinancing, your chosen banking organization will repay the debt under current contracts, fully closing loans. But at the same time you will have a loan obligation in this company.
This will not affect the credit history and will not affect the issuance of loans in the future. As for banks, no matter who repays the loan. Longer overdue debts have a more negative effect. Therefore, the refinancing service in this regard is attractive to all parties to the transaction.
To refinance in any commercial bank, you must fulfill a number of conditions. In each banking company, these conditions may vary. The main criterion is the absence of current overdue debts. As well as the availability of payments under the loan agreement, usually at least three to six monthly payments.
The rest of the requirements are standard, as with a simple registration of lending. Accordingly, the usual set of documents is being established. There are also certain limitations on the duration of the loan.
For example, if you have a consumer loan for a period of 60 months, and in the bank in which you plan to refinance, the maximum terms in this area are also 60 months, then it is not possible to extend the contract term in this case. Accordingly, to achieve a significant reduction in the monthly payment will not work.
Set of documents
As mentioned earlier, this service is not much different from standard lending. Therefore, we need the usual documents confirming the identity, status and solvency of the borrower.
The set of necessary documents that confirm the identity and status include:
- passport or photocopy of it (all pages with marks);
- employment record or certified copy from the employer;
- military ID;
- individual taxpayer number;
- international passport;
- driver’s license.
It will be important to prepare documents on solvency. As if the client resorts to refinancing services, this suggests that he does not withstand the credit load. You can confirm your income by:
- certificate form 2-NDFL of accounting at work;
- statement of cash flow on debit or payroll card;
- certificate of banking form, which can be obtained from the bank, where refinancing is planned;
- other documents confirming the permanent official inflow of money (pensions, tenancy agreements, etc.).
But this is only a standard package for the bank to appreciate the possibility of financing the transaction. What is needed more? In addition, you must provide data on the current loan, which is preparing for refinancing.
- certificate of loan debt and interest on the loan agreement. Usually it is called “certificate of loan parameters”;
- a certificate reflecting information on the date of execution of the contract and the period, interest rate, initial loan debt;
- certificate of receipt of payments to the account and the absence of current overdue debts;
- details of the account opened for repayment, so that the bank could pay the debt and close the loan agreement.
After the refinancing took place, do not forget to get a certificate of closing the loan and the absence of debt to the bank.
Possible disadvantages of refinancing
Re-crediting is a service that should assume a maximum benefit for the client, based on current needs. Before using this service, you should check with the selected bank about the presence of hidden fees.
For example, whether the refinancing service is paid (that is, if you take out a refinancing loan, you need to pay something extra to the bank), or if an interbank transfer fee will be charged.
The transfer of funds between third-party banks, as a rule, is a paid service. It should be clarified at whose expense the commission for the transfer, methods of repayment of loans will be paid. There are banking organizations that do not have their own cash desks or ATMs, through which you can replenish funds to your account. And payment through third parties can be with a commission for transfer, which will make the loan agreement less profitable.
In general, loans are issued for any type of contract, whether it be a consumer loan, car loan or mortgage. If the contract provides for a pledge, then it will additionally be necessary to provide documents on the subject of the pledge:
- PTS and the contract of sale – if the car is issued;
- certificate of title and contract of sale, if the mortgage is issued;
- You may also need a cadastral passport for an apartment, house or land plot and an examination by an independent appraiser.
The exact list should be clarified directly with the loan processing manager, since it may vary depending on the financial institution.
If the terms of the loan provides collateral, then it may be subject to compulsory insurance. For example, a car is often necessary to insure for the risks of theft and damage.
In this regard, a copy of the payment policy and receipts should be provided. If a mortgage on credit is credited, then real estate insurance is a compulsory insurance. In this case, you will also need a policy and receipts.
In order to improve the conditions of the contract or reduce the amount of monthly payments, it is not necessary to contact any other bank. Perhaps, in your own banking organization, a restructuring service is provided, which will greatly simplify the process.
It is the right of the bank to change the terms of lending upon request of the client. To do this, you will not need to prepare a huge package of documents and again wait for the loan.
It is enough to provide certificates confirming the deterioration of the financial situation (employment record with a note of dismissal, a certificate from the accounting department about the decline in income over the past three months). In this case, the bank can meet the client and provide more convenient conditions under the contract.