Use refinancing and combine loans wisely!
November 17, 2019
Refinancing, or refinancing, is a term used to mean the combination of several loans into one. Such a service greatly simplifies the daily lives of many borrowers, but at the same time it may not be the right solution for all clients. In order to be able to use refinancing to your advantage, it is important to understand how it works and when it is profitable, as well as when recrediting should not be used at all. Therefore, in this article, we’ll answer all of the above questions and give you tips to help you combine your credit in a smart, cost-effective way.
What is Refinancing?
Refinancing, or refinancing, gives borrowers the opportunity to combine several smaller loans into one convenient payment with better interest rates and maturity. So, in essence, re-crediting is the conclusion of a new credit agreement with the aim of immediately covering existing debts and then paying them back in a more convenient and profitable way.
This way you can both reduce your total debt and repay it faster with a more favorable repayment schedule. It is also important to note that credit consolidation can be applied to a wide variety of types of credit, from consumer and quick loans to auto loans and leasing payments. However, among lenders, re – crediting offers may vary, such as the number of smaller loans that can be combined into one.
In recent years, Latvian lenders have begun to expand their range of services, actively offering the opportunity to combine credit. This is due to the high demand from customers who are interested in such a service. And customer interest can be easily understood, as such a service makes it much easier for borrowers to make their daily lives.
When to Use Refinancing?
There are two main reasons why borrowers choose to use refinancing:
• To make loan payments more convenient
The myriad of monthly loan payments that can be made every month can create chaos in anyone’s daily life. Moreover, among all these payments, it is easy to forget about any of them, which can cause serious problems in the future. Combining loans into one solves this problem, as you’ll only need to make one payment each month. At the same time, it also facilitates financial planning because it makes monthly expense calculations much easier and more convenient.
• To get a better interest rate and plan your finances in the long run
Often, borrowers choose to refinance their debt simply because they see a better deal with another lender – why not reduce your monthly payment or the total amount of your loan repayable if there is one? Similarly, this service is very advantageous when several loans are repaid at the same time – even if they are low interest rates individually, it is unlikely that adding the interest rates together will make the total interest payment any more attractive. Therefore, in such a case, refinancing is worth considering, as the refinancing agreement will only pay interest on one amount.
Another way credit consolidation can come in handy is when you have problems repaying your existing debt. Of course, this service can not magically solve any situation, but often in this way you can get a lower monthly payment, which facilitates the repayment of loans.
When should refinancing not be used?
As with any other form of borrowing money, it is important to use it responsibly. Therefore, it would not be advisable to continue to refine your existing debt after refinancing your existing debt. Instead, evaluate your financial habits to understand why you need to borrow and learn how to plan your spending.
Similarly, refinancing will not always be able to help you in the event of difficulties with repaying your existing loans, as this loan will also have to be repaid, so it is important to evaluate your financial capabilities before applying to make sure that you are able to do so.
How to apply for refinancing and what to consider before applying?
Refinancing is now part of the range of services offered by most major lenders, so if you want to apply for this service, the first step is to choose the lender you want to do it with. Of course, this should not be done without due consideration, as every offer is different. So knowing what to look out for before applying is helpful.
It goes without saying that you should start by looking at the loan rate offered – how advantageous it is with your existing debt and other lenders’ offers, and whether the interest rate is fixed – otherwise, the initially favorable interest rate on your loan repayment may increase abruptly over time.
Also, pay attention to the annual percentage rate of charge (APRC), which represents the total cost of a loan, including not only interest but also commissions and any other fees associated with the granting of the credit. This allows for a more accurate comparison of lenders’ offers, as it is possible that a lender will offer a higher interest rate but significantly lower commissions and vice versa.
Another aspect of refinancing to look out for is the additional services offered by lenders that can save you money or make it easier to repay your loan. These include a variety of bonuses and special offers, credit breaks, and loan payment insurance, which allow customers to protect themselves in the event of unforeseen circumstances that make credit payments impossible.
Once you have evaluated the refinancing offers and selected the most advantageous one, the next step is to apply. Most of the time, this is relatively simple and does not even require you to go to the lender’s service center, as in most cases applications will be quick and easy to complete online. Also, don’t worry if you don’t have any lender branches near you, as remote credit agreements are part of this convenient and modern service.