On-lending consumer loans. On-lending consumer loans with arrears

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Many domestic financial institutions have a service called "on-lending consumer loans." This procedure, as a rule, is beneficial to both the client and the bank. After all, it allows the borrower to improve the terms of debt service, and the creditor - to prevent the transaction from going into delay. Some banks refinance not only their own transactions, but also their competitors, thus taking away part of their portfolio.

Three main reasons for on-lending

We are talking primarily about large loans issued for a long period. These are mortgages and loans secured by vehicles. Banks offer to refinance consumer loans in cases where there is a high probability that they may become problematic. Then financial institutions make concessionsclients and agree to issue a new deal with a rate reduction (if possible) or an extension of the term.

If we consider the situation from the point of view of the client, then he should think about refinancing, when, after some time, it turned out that the loan was not issued on the most favorable terms. Having paid part of his debt and proved his solvency in practice, the borrower has the right to count on a certain loy alty.

The second reason why you can use the service "on-lending consumer loans" - too much payment. Unfortunately, sometimes the client simply does not calculate his strength, or circumstances do not change for the better over time. And it turns out that the conditions seem to be quite good, but the loan is so burdensome for a person that he copes with it literally with the last of his strength. Then it makes sense to renegotiate the deal for a longer period or change the payment scheme so that the borrower can afford it.

The third reason is the desire to change the lender. If the client is served in another bank, receives wages there, uses other services, then, perhaps, he will be offered refinancing of consumer loans there. Naturally, the terms of the new contract should not be worse than the previous one, otherwise the procedure will lose its meaning.

Which banks offer this service?

Refinancing "foreign" loans involved in many banks. First of all, this concerns large system institutions, such as Sberbank. On-lendingconsumer loans are offered here both to their customers who are on the verge of solvency, and to external borrowers. The latter can make a deal only if there are no delays under the current one.

In VTB Bank, consumer credit on-lending is also possible. Here, as in Sberbank, they are happy to give money so that the client can close a "foreign" transaction at their expense.

Refinance Leaders

In addition to the above financial institutions, Alfa-Bank publicly invites foreign borrowers to issue on-lending consumer loans. The institution positions itself as a leader in this area of active operations and provides an opportunity for the population to get rid of transactions executed on unfavorable terms by registering new ones. According to advertising, this institution is ready to refinance literally any debt, from installments to mortgages. But in reality, we are talking mainly about fairly large consumer loans. As always, mortgages and other types of long-term secured loans are in the lead.

Terms of Service

They usually correspond to those in force for similar products at the time of the transaction. So, for example, Sberbank offers mortgage on-lending for a period of up to 20 years. The situation is similar in VTB and Alfa-Bank. The interest rate on a new transaction will depend on the amount, as well as on the relationship with the client. Thus, Sberbank offers preferential refinancing terms foremployees of enterprises served here on salary projects. On average, it is from 14 to 16 per annum in the national currency.

In VTB, the interest is slightly higher (from 17 per annum), but the process of approval and registration is faster. All records are beaten by the leader in this direction - Alfa-Bank. He offers to renew the mortgage at only 12.2 per annum.

How is the on-lending of consumer loans?

If a person is determined to refinance his debt, then the first thing he needs to do is to apply to the institution where he plans to execute a new deal. As a rule, they provide a salary certificate (for six months or a year, depending on the requirements of the bank) and a passport. Sometimes future creditors ask for a document on the balance of the debt and on the quality of the transaction service. Some people request this information from credit bureaus on their own.

At the next stage, the bank agrees on a new loan for the client to repay the current one and informs about its decision. If it is positive, the borrower informs his bank about the upcoming transaction (refinancing is not possible without his consent) and signs the agreement.

Documents issued during the on-lending process

In addition to the application form that the client submits at the stage of approval, a loan agreement is necessarily concluded. Unlike ordinary transactions, the purpose of issuing funds will be to repay a loan in another bank. At the request of the creditor,an additional insurance contract. This applies only to cases where the transaction is secured by collateral (real estate, car or other).

Some lenders do not require insurance of the collateral, which significantly reduces the cost of the procedure, especially when it comes to car loans. When refinancing a transaction, for which real estate is the collateral, you will also have to renegotiate the mortgage agreement. This is usually associated with additional costs, since it is notarized.

Refinancing consumer loans with overdue

If the transaction is serviced in accordance with the terms of the contract, it will not be difficult to refinance it. The situation is different for loans with violated obligations. If the borrower made a delay in one bank, then he will have to make every effort to prove his solvency to another.

So refinancing of an overdue transaction is unlikely (unless as part of a restructuring within the same financial institution). The bank is interested in the quality of its loan portfolio. Therefore, he can meet the client halfway and draw up a new deal for him to pay off the existing overdue debt, but on the condition that he is convinced of his solvency. So, refinancing of a problem loan is in principle possible, but under certain conditions (for example, making several "control payments" under the current deal).

What should a borrower pay attention to?

Having decided on the need for on-lending before proceeding todirect registration, you should once again read the current contract. If, according to its terms, the borrower must pay a serious pen alty to the bank upon early repayment, then you can immediately forget about refinancing. After all, having executed a new transaction, the client will be forced to fully pay off the current one. And this will significantly increase the amount of debt, so the benefit will be very doubtful.

Among other things, you need to carefully read the new contract so that its conditions do not turn out to be more enslaving. If, after a thorough analysis, the client understands that it is beneficial for him, you need to immediately move from thoughts to actions.

Read more on Realconsult.ru.