All existing bank credit commitments can be refinanced with one or more new credits. The refinancing is a taking a new credit, which repays the remaining unpaid principal on an existing obligation, without paying the remaining agreed interest and charges until the end of the original credit term.
Refinancing is justified and applied when:
– there is a need for more funds – a new larger credit is withdrawn and the remainder of the old one is extinguished. It is usually easier to service and with a lower monthly installment than if two or more credit obligations are served in parallel;
– merging several credit commitments to optimize costs. The obligations may be in different banks and different type – credit card, overdraft, an unsecured loan, etc.
After approval of the new credit, the creditor bank transfers the redemption funds to the other bank (it is possible to be the same bank) and, upon request by the client, the debt is extinguished.
Important – It is the client’s commitment if he/she wishes to close down the products accompanying the repaid credit (most often the account on which the credit is serviced, the package, etc.).
One of the obligatory requirements of banks is that the credit that will be refinanced has been regularly serviced.
The client must meet the bank’s required parameters for the new credit.
Consumer credit refinancing
Under Consumer Credit Law, the consumer is authorized at any time to repay all or part of his obligations under the credit agreement.
No fee or penalty for early repayment is due, if:
- the repayment of the loan is made in a period during which the interest rate under the credit agreement is not fixed;
- the repayment was made on the basis of a payment under an insurance contract, which purpose was to guarantee the repayment of the credit;
- the credit agreement is in the form of an overdraft.
Mortgage credit refinancing
Targeted mortgage credits can also be granted to refinance existing ones in other banks.
Under the Mortgage Credits Act, the consumer has the right at any time to repay their liabilities partially or completely.
Fees and commissions for early repayment:
The creditor shall be entitled to fair and objectively justified compensation for the expense directly related to the early repayment of the credit up to one percent of the prepaid amount of the credit when it is fully repaid before 12 monthly repayments from its utilization.
The creditor is not entitled to compensation or penalty for early repayment of a credit agreement when the credit is repaid after 12 monthly repayments are paid.
Refinancing aims to unite obligations and achieve better financial conditions for the client.
For it to have a positive effect, all expenses related to the price of the new credit must be calculated precisely (valuation, notary fees, mortgage cancellation, etc.). It is important to calculate the difference in the total amount owed to the banks at the end of the credit period.
Refinancing of corporate credit
Corporate credits and other (credit cards) can be refinanced with new corporate loans to improve price conditions, change other parameters or increase the amount of the credit.
For corporate credits, a prepayment commission is usually due, which in most cases is pre-agreed in the credit agreement. The Borrower pays a commission upon early repayment of the loan under the terms specified by the creditor bank in the credit agreement or applicable at the repayment date if the amount of the commission is not established in the Contract.
For it to have a positive effect, all expenses related to the price of the new credit must be calculated precisely. A correct calculation of the commission for early repayment is also a must. It is important to calculate the difference in the total amount owed to the banks at the end of the credit period.
Creditchoice credit consultants will analyze and compare the costs of your existing debts with the new credit costs and calculate the difference.
The service is completely free to you, and the money we can save you are often of a significant amount.