Which bank is better to choose for refinancing a loan

2024 Author: James Gerald | [email protected]. Last modified: 2024-01-18 00:05

Loan refinancing for individuals is a popular service that allows banks to reduce the number of problem loans, and borrowers to reduce the interest rate when paying off old debts. Which bank is better to choose is up to the client himself, based on information about the conditions for granting a new loan.

Concept and types of refinancing

In fact, refinancing is on-lending to bank customers, that is, a credit institution provides funds to repay old loans. A person who has one or more loan agreements applies to the bank with a request for a new loan, the funds of which are supposed to be used to repay the old / old.

Refinancing can be provided in two ways.

Internal refinancing

It involves obtaining a new loan in the same bank where the old one already exists. In this case, the credit institution finances the borrower in order to repay the last balances of the previous loan, that is, the bank provides its own requirements. It is noteworthy that the new lending is carried out on more favorable terms for the client by lowering the interest rate.

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An example. In 2015, the borrower borrowed funds at 16% per annum. Over the past period, there was a gradual decrease in the key rate of the Central Bank, as a result of which banks also reduced interest on loans. In 2020, credit institutions are already coming up with a tempting offer to issue a loan at 9%.

Now it is quite possible to refinance a loan at 10% per annum, if the borrower does not have certain benefits (a salary account in this bank, he is a military or civil servant, and others). Of course, such an offer has some advantages due to the reduction in the amount of overpayment.

A credit institution may offer internal refinancing upon the occurrence of the following events:

1. Deterioration of the financial situation of the borrower due to the loss of ability to work or place of work, the birth of a child and other circumstances.
2. In the case of a client requesting a service.

External refinancing

Unlike the first option, external refinancing involves the issuance of a loan in order to return funds to a third-party bank.

Example. The borrower in 2018 received a loan secured by a car from the Rossiya Bank. In 2020, he applies to Rosselkhozbank with a request for refinancing. Rosselkhozbank meets halfway and buys out the old loan of the borrower from "Russia", at the same time providing the client with a new loan on more favorable terms. The motorist paid 23% per annum for the use of funds taken from the Rossiya Bank, and now he will pay with Rosselkhozbank at 12%.

This scheme is used by many large banks, willingly buying out old loans, taken, for example, from a microcredit organization at 360% per annum. The lending institution offers a refinancing service, while the percentage is ten times lower.

Terms of service

Each credit institution has the right to establish its own conditions for refinancing individuals, but practice shows that the requirements of almost all banks are largely similar. Which one is better to choose, you can determine based on the information presented in the table.

Credit institution name	What loans are subject to refinancing	Program	Loan amount (in rubles)	Annual rate (in%)	Timing
Home credit	Any, including express loans, car loans, mortgages	Refinancing	From 10 thousand to 850 thousand	From 22, 9	1-5 years old
VTB 24	Any third party (except VTB)	Refinancing	From 100 thousand to 3 million	17	Up to 7 years
Rosbank	Any, except for mortgages and car loans	Refinancing (salary only)	From 50 thousand to 1 million	14-17	From 6 months Up to 5 years
B&N Bank	Any third party	Refinancing	From 50 thousand to 3 million	15, 9-29, 9	2-5 years
VTB Bank of Moscow	Any consumer	Reducing the amount of loan payments	Up to 3 million	From 15, 9	Up to 7 years
Rosselkhozbank	Any third party	Refinancing	Up to 750 thousand	17, 3-25, 75	1-5 years old
Russian capital	Any third-party (up to three at a time)	Reduced rate	From 30 thousand to 1.5 million	21, 9, if there is a salary account 18, 9	Up to 5 years
ICD	Any third party	Credit reboot	Up to 1.5 million	16-34, 5	From 6 months Up to 15 years old
Russia	Any third party (up to five at a time)	Refinancing	From 50 to 750 thousand	14-18, 25	From 6 months Up to 5 years

Banks carry out refinancing on the following conditions:

• at the time of the transaction, the debt on the loan is not 50 thousand rubles;
• the conclusion of a loan agreement was made no earlier than 3-6 months before the borrower applied for a refinancing service;
• the old loan agreement expires no earlier than 3-6 months;
• the client has no outstanding loan.

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In addition, the borrower must meet the following criteria:

1. Be a citizen of Russia at the age of 21-65. The Bank has the right to establish its own age criteria in the direction of their increase. Age is taken into account at the time of termination of the refinancing agreement.
2. Have a positive credit history, which also implies the absence of enforcement proceedings due to non-payment of loans earlier.
3. For some credit institutions, an important factor is the presence of a permanent residence permit in the region at the location of the bank or its office.
4. You also need to document your income by submitting an appropriate document. At the same time, an applicant for a loan must be officially employed within the last 3-6 months before applying to a bank, or have a stable income.

These are the basic requirements for the provision of the service, but each bank has the right to supplement the list with others, at its discretion.

Before contacting a credit institution for a refinancing service, you should prepare a package of documents, which includes:

• identity card (passport) of the borrower who wants to use the service;
• proof of identity of the guarantor, if his participation is stipulated by the contract;
• military ID (for men) of draft age;
• documents confirming the presence of official income and place of work;
• similar documentation of the guarantor, if he participates in the transaction;
• valid credit agreement.

In addition, the bank reserves the right to request other documents in order to verify the prospective client for compliance with refinancing requirements.

When refinancing is beneficial

The service becomes in demand only when the bank reduces interest rates. Therefore, it is recommended that you familiarize yourself with this information in advance in order to determine which credit institution is better to choose.

But there are no clear rules here. Whether the borrower will benefit from refinancing the loan depends on many factors: the conditions of the new loan for individuals, the difference in interest rates (it must be at least 2%), the remaining terms of the loan agreement and the amount, own financial situation and other points.

It should also be remembered that recrediting only makes sense when the existing financial burden of servicing the old loan in amount exceeds the costs of reissuing insurance, property, notary fees and possible early repayment penalties.

With the help of refinancing, you can not only significantly improve the terms of repayment of the previous loan, but also get some benefits in the form of:

1. Redemption of mortgaged property. This is important when you urgently need to sell or transfer property to third parties.
2. Combining two or more loans into one, which greatly facilitates the repayment procedure.

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Where is the best place to get the service

If you have a loan from a third-party bank, or several debt obligations to different credit institutions, it makes sense to get a refinancing service for individuals in one financial institution. To make it easier to determine which bank is better to choose, you need to draw up a small table that includes the following columns:

• the name of the credit institution;
• the number of payments made on the current loan;
• the date of the end of the contract;
• the remaining amount to be paid in full.

Thus, by filling out the table, the borrower will be able to select a bank with the appropriate refinancing conditions.

Summarize

1. Refinancing of individuals is aimed at repaying old loans by obtaining new loans on more favorable terms.
2. You can apply to the bank for obtaining the procedure only if the remaining loan amount significantly exceeds the costs of formalizing new obligations (payment for notary services when transferring property, possible penalties for early repayment, etc.).
3. Before applying for a service, you should carefully read the terms of its provision, which will allow you to determine which bank is better to choose.