Difference between refinancing and a new loan

Loan refinancing at lowest refinancing rates improves the payment terms of an existing contract and must be done by the same institution where it was signed. A new loan means a credit concession made from scratch, whether it is paying off an old loan or not. It can be requested from any bank or financial agent. For a refinancing to work, you must pay one or two installments to your previous loan.

However, the terms and conditions vary from one to another. In most institutions, it is even necessary that a part of the debt be already paid to reset the interest or terms. If the person needs to improve the payment conditions, he will have to take out a new loan with lower interest rates and more installments, replacing one debt for another.

When to refinance a loan

It is also possible that the bank did not want to refinance the loan nor did not offer payment terms that were much better than the initial ones. If that happens, it is a good idea to take out a new loan to another finance company, transferring the debt and refinancing there. It is always worth trading an expensive debt for one with lower rates that fits your budget better. So do not hesitate to refinance or get new credit, depending on your situation.

What are the advantages of loan refinancing?

It is always important to clarify the doubts and read the terms & conditions before deciding on a particular subject. Check out the main benefits of the modality below.

Less bureaucracy

Because the previous financial institution already has all the documents and data of the applicant, the loan refinance process is easier. Fixed rate loans may also benefit from loan refinancing. If you wish to change the bank, there will be new documentation but with much less bureaucracy.

Possibility to increase the loan amount

In refinancing, you can get a larger amount of credit. In this way, the client who needs more money to borrow can borrow it with equal or even better installments and interest than in the first contract.

Flexibility of deadlines

When thinking about refinancing, many people think only about the possibility of reducing the contract interest. However, being able to negotiate a longer payment period is also an excellent advantage, as it is a way of diluting the amount to be paid month by month. Home loan owners often decide to take out a refinancing loan to facilitate on monthly savings.