How to repay a loan with a loan? Take a loan from a bank. Is it possible to pay off the loan early

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

Modern life is a cycle of circumstances that can greatly disrupt well-thought-out and built plans. Over the past few decades, modern people have become accustomed to solving the problem of any financial issues in banking institutions. Opportunities have opened up for citizens to borrow money to buy real estate, a car, household appliances, furniture and other goods that are necessary for a normal existence.

Lending is also provided for the purchase of building materials, solving business problems, treatment, recreation, study and other needs. Every citizen who has a good credit history and a steady income can take a loan from a bank. Getting any type of loan is quite easy due to the fact that a large number of loan programs have been thought out in the banking sector, which, like a lifesaver, help solve flow problems. Bank customers often do not even think about the fact that situations may arise in which debt repayment becomes a problem.

What can affect the ability to make mandatory payments

Causesa lot of complexities. They can be:

• job loss;
• disease;
• jump in the exchange rate;
• death of a family member;
• one of the earning family members will become unemployed;
• negligence;
• the emergence of other life problems that led to financial losses.

Possible problems with loan defaults

Non-payment of obligatory payments under the concluded loan agreement entails a sequence of additional problems. It all starts with calls from bank employees, then letters of claim from the management of a banking institution, a lawsuit, employees of the executive service appear at the address of the debtor's residence. And, even worse, there are threats from special services. Intimidation of unscrupulous borrowers is becoming one of the popular ways to demand borrowed funds. In addition, credit bondage also provides for pen alties for non-payment of debt and bank fines, which increase the total amount of debt several times. One of the ways out of this situation, according to experts, is to borrow funds to repay the amount taken. To find the answer to the question "how to repay a loan with a loan", you need to have some important information. There is a term in banking legislation that denotes the full repayment of borrowed funds on the basis of a new loan from a bank. If you look at the essence, then in the process of refinancing or on-lending, you need to take a loan to pay offanother loan.

Main benefits of on-lending

1. Refinancing helps bank customers get out of financial troubles and correct past mistakes.
2. This method of loan repayment actually increases the repayment term without any financial loss.
3. On-lending allows the borrower of funds to significantly reduce their mandatory monthly payment when paying off debt to the bank.
4. If you study well all the credit programs of the country's banks before you take out a loan to pay off the loan, you can even reduce the principal amount of the debt.
5. Refinancing avoids the accrual of fines and pen alties for non-payment of the principal amount of the debt.
6. This debt payment option helps to avoid litigation, which requires a lot of time and nerves.
7. Before repaying a loan with a loan, you can choose a bank with the most favorable conditions.

What you need to pay attention to before concluding a refinancing agreement

Before you repay the loan with a loan, you must carefully study the primary loan agreement. Banking policy provides for special programs that contribute to the repayment of debt through an additional loan. Often the possibility of refinancing is spelled out in the contract itself. It occurs after a certain amount of time has passed. In each bank, the period that must pass before concluding a refinancing agreement is different. Averageits duration is six months, but other options are possible: three months or a year. The management of a banking institution is itself interested in the repayment of the borrowed amount being fulfilled, therefore, the conditions of the loan program provide an opportunity for the bank's debtors to cope with the established debt payments by reducing interest on the main body of the loan, increasing the loan term and other loyal programs.

It is necessary to carefully reread the contract before quickly repaying the loan

Refinancing is not suitable for all loan agreements. Rather, for some of them, this method of debt repayment does not matter.

There are some programs of banking institutions that do not allow early repayment of the body of the loan. Therefore, it is necessary to clarify this possibility before signing documents. Bank officials claim that there are loan programs that do not provide for changes in the debt payment schedule. In such cases, the refinancing agreement does not make sense. Moreover, there are banks that provide a fee for early repayment of the loan, so these details need to be clarified. In 2011, the law prohibited the use of this method of calculating interest, but they are still found as one of the types of hidden fees.

Can I repay a loan early and what are the advantages of early repayment?

Early repayment of debthas a lot of advantages. First of all, they relate to the psychological state of the debtor. When the borrowed amount is fully given away, the person feels much more comfortable and freer. If we analyze the payments, then the early repayment of the loan automatically reduces the amount of the principal debt of the borrower funds by reducing the amount of accrued interest. An important advantage of debt repayment is that the saved money can be invested in a profitable business, and not paid to the bank. Early loan repayment in most cases is beneficial for customers, but not for banking institutions. They lose unpaid interest on loans if they are paid early. Until 2011, many banks generally provided for various commissions and large fines for prepaid debt. Now the legislation has improved the conditions for lending money to borrowers, but a moratorium for a period of six months, a year or at least three months on early repayment still exists. You can specify the duration of the ban in each bank in the loan agreement even before you repay the loan ahead of schedule.

Refinancing consumer loans

Consumer loans are taken for a period much less than larger debts, but at the same time they are not very beneficial for the family budget. You may have seen an interest rate on loans that is much lower than your bank, which could be an incentive to refinance. It often decreases over time. This can be considered as some risk of a borrower who borrowed an amount for less thanfavorable conditions. For example, your loan was issued by Privatbank. How to repay the loan in advance at this financial institution must be deducted in the loan agreement. If it has the possibility of refinancing on more favorable terms, then to reduce the interest rate, it is enough to issue a simple standard package of documents. If you decide to take a new loan from another bank, you will need to collect additional documents.

Refinancing car loans

Before you quickly repay a loan to buy a car, you need to collect an additional package of documents that relate to the car and the current loan. This package of documents depends on the purpose of concluding a refinancing agreement. If you are applying for a loan to buy another car, then the procedure for drawing up an agreement requires the sale of the first car in the showroom. The proceeds will be the initial contribution under the refinancing agreement. But in any case, it is necessary to conclude a new insurance, in which another bank will be indicated as the beneficiary.

Take out a bank loan to pay off mortgage debt

This type of on-lending is considered the most difficult to process, it requires additional documents relating to the property for which the loan was taken, payments made, the balance of the loan body and other details. At the same time, it is necessary to conclude a new insurance contract indicating a new bank, make an assessment of real estate at the moment and re-register real estate. The renewal of a new mortgage agreement will entail additional significant costs, they will be justified under more favorable lending conditions only if the amount of the unpaid mortgage body is large.

Additional package of documents and conditions for refinancing in other banks

Before you repay a loan with a loan by borrowing money from another bank, you need to collect additional documents for its registration. In addition to the standard package, in order to complete the transaction, it will be necessary to collect certificates that characterize the state of the current loan.

1. Before you can early repay a loan for the purchase of real estate or a car by borrowing funds, you must present a previously signed loan agreement.
2. You also need to prepare a debt repayment schedule indicating the amount of monthly mandatory payments.
3. If additional agreements have been concluded for the current loan (a contract of agency, pledge), then the originals of these agreements must be presented when applying for a new loan.
4. At the bank to which you owe money, take a certificate of the balance of the debt.
5. If refinancing will be concluded for a large amount (it is indicated in each bank), then it will be necessary to additionally draw up a guarantee agreement for at least one individual.