How to repay a loan? Refinancing

Answering the question asked in the title of the entry, we can say that the loan must be repaid in accordance with the contract. Unfortunately, this is not always so simple. Loan repayment is not always as simple, easy and pleasant as taking it.

When incurring financial liabilities, we declare their repayment within a specified period and on agreed terms in the manner of a signed contract with a loan institution. It happens, however, that despite the agreement and our sincere intentions, we are not able to meet the requirements set before us.

Life situation or a combination of adverse events

Life situation or a combination of adverse events

May mean that we will need a longer period to pay back the loan. The solution to the problem may be extending the repayment deadline or refinancing the debt. Sometimes consolidation is the only way out. Treated carelessly, all these solutions can become, however, the first step to enter the debt spiral.

Refinancing loans is not new and has been known as a service in the banking sector for years. Therefore, the development of the market and its needs have triggered the demand for this type of product. Hence, more and more loan institutions specializing in consumer loans are introducing such services to their portfolio.

If we are considering indebtedness for a short period, we have at our disposal a whole range of products from both banks and loan companies usually offering a 30-day service fully implemented via the Internet. However, when deciding on such a financial product, it should be remembered that not only the borrowed amount of money should be repaid, but also commission and interest.

The time for which we borrowed the money is relatively short, which is why there may be a delay in repayment. In this case, contact the lender as soon as possible and discuss how to resolve the issue. By design, companies try to handle this type of issue in a way that is least disruptive to the client, especially if the client has reported a problem in advance. However, in the event that the client does not show a willingness to cooperate, the loan institutions shall start debt collection procedures immediately after such a situation. The rules are inexorable in relation to debtors also those who happened to them incidentally.

What to do if we have a problem paying off your liability

bank

Returning to the issue of repayment problems, let’s try with all reasonable judgment to consider all available solutions. As we said above, no one is so anxious for a debtor to pay back a liability on a timely basis, like a loan company. Therefore, we can be sure that our contact with the lender before the repayment date is due will be beneficial for both parties.

The company will advise us on the optimal solution providing the client with time comfort and a higher probability of debt recovery. In one case it will be possible to postpone repayment, in another, it will be proposed to take out a loan to refinance the debt. Since these are additional products of the lender, they are usually associated with considerable costs.

How refinancing works

How refinancing works

The decision to refinance existing debt can be implemented according to two basic options, which depend on the operating model of the loan institution. In the first option, the company can grant a new loan, thanks to which the customer will pay back the previous one. In the second, however, he may direct the debtor to a cooperating company specializing in this type of product to provide the relevant services.

We should remember that in the case of the second option after paying the commission, the money from the debt refinancing loan will go directly to the account of the company to which the liabilities arise. It is therefore logical that once the loan is refinanced in the first company, the client becomes the debtor of the second.

When signing a refinancing agreement, you should look at its terms, as is the case for all contracts that have financial obligations. Especially those dealing with costs. The commission amount should be presented in the company’s regulations or the table of fees. The amount of commission depends on the amount and repayment period of the liability. It should be remembered that the costs associated with refinancing can be very high and often come close to fees for extending the repayment date.

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