Monday, 21 July 2014

Loan refinancing

Remortgage is becoming popular among Poles, which is a result of their growing knowledge of financial services and products. The result is a greater awareness of reflection - why overpay when you can pay less?

This is to minimize the cost of borrowing is the main premise of providing the benefit of refinancing. Its mechanism should be understood as the repayment of old - the more expensive the loan, the new - cheaper, or more favorable loan. It is worth noting some distinction. It is about the concept of consolidation, which, although similar to refinancing, as opposed to it does not apply to one and the number of credit commitments, such as the total debt in the card, cash loan and mortgage loan.

When you refinance?

The first situation in which it is worth to take a decision on the refinancing, a significant change in market conditions for granting loans. Because of the time it is most often necessary to effect this change, we are talking mostly about long-term liabilities - loans and mortgage loans. This involves, of course, to reduce the interest rate of the loan. In this case, a loan with a higher interest rate is replaced by a commitment taking into account currently available - reduced the interest rate, which is the reduction of the total cost of the loan.

Another situation in which the refinancing will be beneficial, the occurrence of financial problems, and thus the difficulty in regulating the loan installments on the existing conditions. In this case, the process of refinancing into account the extension of credit, thereby reducing the installment obligation. This solution, although in order to stabilize the financial situation is not very favorable, because each time extending the repayment period also entails an increase in its cost.

Finally, the third premise, which provides for the refinancing, a significant change in the exchange rate in the case of loans granted to such in francs or euros. Refinancing will be beneficial but only if the exchange rate on the date of the refinancing will be a lot lower than its height at the time of signing the old credit agreement. For example, when we signed the loan agreement in the amount of 50,000 euro exchange rate was 1 EUR = 4.31 PLN, but after some time, the exchange rate fell to 4.00 - precisely the time we pay a commitment, it saves because of the depreciation amount until about 15 thousand. .

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