Refinance

Credit Refinancing

All existing bank loan obligations (or credit commitments) can be refinanced with one or more new loans. Refinancing involves taking out a new loan to pay off the remaining principal on an existing obligation, thereby avoiding payment of the remaining agreed interest and charges until the end of the original loan term.

Refinancing is justified and applied when:

• There is a need for additional funds: a new, larger loan is drawn down, and the remainder of the old loan is extinguished (or paid off). This is usually easier to service and results in a lower monthly instalment than if two or more credit obligations are serviced in parallel.
• Consolidating several credit commitments to optimise costs: The obligations may be in different banks and of different types – such as a credit card, an overdraft facility, an unsecured personal loan, etc.

After the new loan is approved, the creditor bank transfers the redemption funds (or payoff amount) to the other bank (it is possible to be the same bank), and upon the client’s request, the debt is extinguished (or closed out).

Important: It is the client’s responsibility, if they wish, to close down the products accompanying the repaid loan (most often the account on which the loan is serviced, the bank package, etc.).

One of the mandatory requirements of banks is that the loan being refinanced must have been regularly serviced (or must have a consistent repayment history). The client must also meet the bank’s required parameters for the new loan.

Personal Loans Refinancing

Under the Consumer Credit Act (Bulgaria, specific law reference), the consumer is authorised to repay all or part of their obligations under the credit agreement at any time.

No fee or penalty for early repayment is due if:

• The repayment of the loan is made during a period when the interest rate under the credit agreement is not fixed.
• The repayment was made based on a payment under an insurance contract, the purpose of which was to guarantee the repayment of the loan.
• The credit agreement is in the form of an overdraft.

Mortgage Loans Refinancing

Targeted mortgage loans can also be granted to refinance existing mortgages in other banks.

Under the Mortgage Credit Act (Bulgaria, specific law reference), the consumer has the right to repay their liabilities partially or completely at any time.

Fees and commissions for early repayment (Prepayment Penalties):

• The creditor shall be entitled to fair and objectively justified compensation for expenses directly related to the early repayment of the loan, up to one percent (1%) of the prepaid amount of the loan when it is fully repaid before 12 monthly payments from its utilisation.
• The creditor is not entitled to compensation or a penalty for the early repayment of a credit agreement when the loan is repaid after 12 monthly payments have been made.

Refinancing aims to consolidate obligations and achieve better financial conditions for the client.

For refinancing to have a positive effect, all expenses related to the cost of the new loan must be calculated precisely (appraisal fees, notary fees, mortgage cancellation fees, etc.). It is important to calculate the difference in the total amount owed to the banks at the end of the loan period.

Business Loans Refinancing

Business loans and other commitments (e.g., credit cards) can be refinanced with new business loans to improve pricing conditions, change other parameters, or increase the principal amount of the loan.

For business loans, an early 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 on the repayment date if the amount of the commission is not established in the Contract.

For refinancing to have a positive effect, all expenses related to the cost of the new loan must be calculated precisely. A correct calculation of the early repayment commission is also a must. It is important to calculate the difference in the total amount owed to the banks at the end of the loan period.

Creditchoice credit consultants will analyse and compare the costs of your existing debts with the new loan costs and calculate the difference.

The service is completely free of charge to you, and the money we can save you is often a significant amount.