June 20 2022
Ways to refinancing your loan
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Nowadays, having loans has become practically unavoidable. In fact, almost everyone has an outstanding credit card charge, a mortgage, or a mid- or long-term loan that they're still paying off. The problem appears when the economic situation changes and facing the payment of debts becomes difficult. In situations like this, a refinancing can be the solution, and here we tell you everything you need to know to refinance loans and get a break.
In this ranking you will find fast and safe loan options to refinance your debt and continue on your way without worries; with 100% online procedure, without many papers or requirements.
What is loan refinancing?
To begin with, when we talk about refinancing loans, we mean restructuring the loans you already have in order to pay them more comfortably. Suppose you have a personal loan and you want to change its conditions so that they adapt to your current financial situation. That is when you go to debt refinancing to get a new agreement. This new agreement may include interest rate changes, payment dates, or other changes to the original terms of the contract.
Of course, you have the obligation to continue paying the outstanding debts, although now you can adapt the payments according to your financial capacity. In this way, refinancing your debts is an ideal option if you are looking to improve the conditions of your financing face of a bad economic situation to avoid falling into defaults. Thus, it can help you avoid your entry into delinquent files and the other consequences of not paying a personal loan.
Ways to refinance your loans
As you will see below, there are several options offered by financial institutions and banks to refinance loans. Here we show you the most common alternatives that you can access depending on your needs:
- Novation: if you have a mortgage or a long-term loan, this option allows you to change the conditions at a later time after signing. However, for this to happen, it is necessary for the entity to agree to renegotiate the loan to adapt it to your current situation. In general, the return period is usually extended so that the monthly installments are lower.
- Reunification of loans: unlike the previous option, this consists of uniting all your payment commitments in a single loan, where you have to pay a single installment with a single interest rate. In this way, you manage to reduce the amount of monthly payments that you must make and you obtain greater comfort by having a single active loan.
- Subrogation: this last modality is not the most common but it is still a possibility when refinancing debts. Basically, it consists of changing entities when your bank is not willing to negotiate. In this way, the debt is transferred to the new entity and the conditions are improved so that they adapt to your current needs.
When is it convenient for you to refinance loans?
In general, refinancing is a very useful alternative when you are looking for better conditions to pay your debts, especially if you are in any of these situations:
- Your loan payments exceed 50% of your income.
- Run the risk of falling behind on your payments.
- You have reached the limit of your online or physical credit cards, which you have used to pay other debts.
In short, if you find yourself in any of these scenarios, refinancing debts can be a profitable solution for you. Through this system you can get lower monthly installments and a longer repayment period adapted to your possibilities, to pay your debts without costing you so much.
What to keep in mind when refinancing loans?
Although refinancing debts is an option that allows you to obtain more favorable conditions and avoid falling into defaults, it is important that you take into account the following advice:
- Evaluate your payment capacity, if it is not very good and does not allow you to make ends meet , it is best to wait a bit before requesting a refinance. Normally, this option is granted only to people who have a good payment history. So if you affect it, you will no longer be able to access it.
- Consider the type of debt: depending on whether your debts are the result of a tacit overdraft, banking, loans or utility bills, you will have to take into account some options or others.
- Calculate the costs of refinancing: this procedure usually involves certain expenses that you must be able to assume, such as costs for novation or modification of the credit, study expenses (when it is necessary to establish a new loan) and commissions for early repayment. Check with your bank or financial institution to be sure that you can afford the refinancing.
- Adjust the repayment term to suit you: although paying lower monthly installments is very attractive, in the end you end up paying more interest. Therefore, try to choose a repayment term that allows you to pay comfortable installments but without extending it too much to save on interest.
- Choose a good negotiating entity: although you can refinance your debts directly with the bank, it is also possible to do so through a specialized entity such as the Digido. In this way, you can obtain professional advice and get the best conditions according to your situation.
How to access a refinancing?
The requirements and procedures to refinance debts vary depending on the bank or financial institution to which it is requested. However, in most cases, these are the steps you must follow:
First, choose one of the credit institutions in Philippines from the ranking to request refinancing.
If your request is viable, the entity will present you with the new financing conditions that you must review carefully.
Once the operation is approved and signed, the previous loan is paid off and the additional amount can be used for other needs. The amount of the new loan may vary depending on your income, the amount of the original loan and what you have previously repaid.
Finally, you must comply with the payment of the refinancing of the debt in the agreed manner. Keep in mind that any non-payment may lead to the automatic expiration of the debt and lead the entity to bankruptcy if you cannot pay the entire debt plus interest.
It is worth mentioning that refinancing debts is usually a much faster operation than the approval of a normal loan. This is because the credit institution already has your credit history at hand, which speeds up the procedure.