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Refinancing a loan: what it is and what are the advantages

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We are all much more comfortable than a few years ago with all the banking products on the market. This is because our needs and technology are much more advanced and diversified. We already know when and how to access a loan for our grand plans, but how beneficial is refinancing it?

In order to know which are the most suitable solutions for you, it is good to be informed about all the possibilities in the market, before planning your financial life.

What is refinancing a loan

Maybe you have already taken a home with the help of the bank or you are going to get involved in the Prima Casa program. It is never too late to know your opportunities for new purchases, instead of staying anchored only in this loan because the rate does not allow you more. Or maybe you are already involved in several monthly installments and can’t afford anything extra.

Refinancing a loan is the possibility to access a new loan through which to pay off the old one or the active ones (if you have more), for a new period of time to help you more. This way, your monthly payment is recalculated for that period, with new contractual conditions (commission, interest, etc.) and you can even stay with an extra amount in your pocket.

If you have a diversified relationship with banks by purchasing several loans, especially at different banking institutions, it is important to remember that you can refinance as many credit agreements, obtained in various currencies. This way you move all your debts in one place with a new loan that covers your debts and you re-establish your monthly rate and the period for which you will pay.

What are the advantages for refinancing a loan

For some, refinancing a loan may give the impression of resuming the relationship with the bank, which for the first time may be more sustainable. This is because trust is gained, or proven, through supporting documents.

But for others, refinancing a loan means the ongoing opportunity to meet their financial goals and provide a lifestyle independent of the dying monthly savings.

An important advantage is that you get rid of the chaos of payments if you have loans from several banks. It can be difficult and stressful to follow the payment date set at each bank and calculate your monthly receipts so that you make sure you have money in your account on the due date. Loan refinancing moves your total debt to a single bank, and so you can organize once a month to pay the installment.

Another advantage of refinancing one or more loans is that it can bring you an extra amount in your pocket. If the amount granted on the new loan is higher than your total payment on the loan or loans already active, this means that when you pay them you are left with some money in your pocket. Which you can spend as you wish.

The speed in accepting the refinancing of a loan is an important advantage, because you have already gone through the eligibility process. At the first contractual relationship with the bank, you go through a verification process to be considered eligible in accepting the requested loan. Having already one or more active loans that you want to get rid of, refinancing gives you priority and speed in accepting your request.

Refinancing a loan can be the ideal solution to avoid a negative image at the credit bureau. Maybe your current life includes several factors that consume your financial resources, and the rate at the bank seems harder to take than when you accessed the loan. Why risk consecutive late payments when you can choose a refinancing with a lower rate over a longer period of time?

As in the case of inability to pay, refinancing a loan is your salvation because it protects you from personal debts accumulated on the left and right that can sink harder. Why complicate your financial life when you can choose to refinance a loan with a lower rate over a new period of time?

Refinancing a loan leaves you with savings available for other plans. You do very well with payment or monthly payments and you managed to put money aside. Why spend them on a new couch or car, when you can choose to refinance a loan, and with the savings to go on a super vacation?

Banking institutions have become very friendly and open to personalized customer relations. That is why each of them comes with all kinds of advantageous and tempting conditions. Which is why it is good to study all the offers and choose the right bank for you.

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