The loan refinancing service appeared relatively recently in many loan companies and probably that is why it is still not well known among people taking loans on the Internet. Meanwhile, it is worth knowing about it, because it is a good way to avoid many problems if you can not repay the loan within the prescribed period.
Most online loans are granted for a relatively short period, usually for 30 days. During this time, you should pay back not only the amount of money borrowed, but also the commission and interest. With the collection of the entire sum needed, the borrowers usually have no problem. Some of them, however, sometimes have insufficient funds to repay the loan on the designated day. Unfortunately, many such people simply do not repay the loan on time, thus exposing themselves to quite serious consequences.
In the majority of loan companies, debt collection procedures are initiated in such cases, which are related to:
charging penalties for being late,
unpleasant conversations with the debt collection department,
in extreme cases, even entering data of an unreliable borrower into nationwide debtor databases.
Refinancing as a form of extending the loan repayment date
Undoubtedly, being late in paying off the loan does not pay off. However, in the case of problems with timely repayment, you can cope by using the loan refinancing service.
It consists in the fact that the borrower is granted a loan from another company, which is intended for the timely repayment of the first loan.
In order to make life easier for borrowers, many companies relieve them in seeking a refinancing loan and arranging all formalities.
The only thing a borrower who has a problem with the timely repayment of a loan has to do is report this fact to a loan company, usually through his account on the company’s website. In most companies, this should be done before the old loan repayment date. In our article: Momentum for repayment of debt is a good or bad idea to read whether it is worth using such a solution.
What do you need to know about a refinancing loan?
Applying for a refinancing loan is also associated with the need to pay a fee, which should be specified in the table of fees and commissions or regulations.
The refinancing loan is granted in exactly the same amount as the previous loan from which the repayment has a problem. Therefore, a person using refinancing does not receive a new loan to his account, because the funds are transferred between two loan companies.
At the time of transfer, the “old” loan is settled, and the borrower has a “new” loan with a new repayment date. Thanks to such a solution, the borrower can easily avoid problems related to the late repayment of the loan in a simple and quick way.
In company A, a loan in the amount of PLN 1000 was drawn for 30 days, for reimbursement, including interest and commission, PLN 1280 remains.
In order to apply for refinancing of a loan, you must first pay the interest part of the loan to company A, which is PLN 280.
A refinancing loan in the amount of PLN 1000 from company B is entirely intended to repay the loan in company A.
The borrower has to repay a new loan in company B with a new repayment date of up to 30 days – the amount to be refunded is PLN 1280.