Debt Consolidation

Is a debt refinance the same as a repayment?

A debt refinance is not the same as a repayment. Refinancing is carried out without being in arrears and basically consists of requesting a loan with better conditions to pay off the original loan. Instead, repayment is done when you already owe one or more installments, whoever lends the money also wants to do it and certain conditions are agreed so that you can pay off the debt and the rest of the loan.

That is why you need to be informed in case you look a little tighter to pay the monthly installments of the consumer credit that you have requested.

Considerations before doing a debt refinance

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In short, then, refinancing has to do with applying for a new credit, either in the same bank or another, preferably, to pay off the part that you still have to pay for a consumer credit. The main objective is to obtain a better interest rate, although in some cases it may be to decrease the installment even if you end up paying more.

Those are decisions that each person makes when doing it, however, in Lite Lender we consider that there are instances that are better than others to do the debt refinancing. A good time to consider debt refinancing is when interest rates drop. Thus, you can reduce your monthly installments or decrease the term of the credit, keeping payments similar to those of the original credit.

What you will have to take into account before refinancing

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New interest rate

When you think about refinancing, you have to get a consumer credit with a lower interest rate than the original. In addition, you will have to offset the expenses for prepaying the other loan and for taking out this new loan. Remember to compare the CAE of the different options to choose the most suitable one.

Monthly fees

They may offer you a cheaper monthly payment than the current one. There you will have to see if the credit is cheaper or if the rate is higher and even if you pay less monthly, in the end you will have returned more money than the original credit.

Credit term

The new credit should be for the same period of time as the previous one or less. This way you will avoid a greater amount of payments and interest. If you consider paying fees for more years, the monthly payment should be less.

Total cost to refinance

It is important that you compare the CTC or Total Cost of Credit to really know if you will be paying less with the new loan.

Debt repair

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Repairing a debt means establishing new payment conditions, so that you can meet the payment of the loan in terms different from those originally agreed; It is a matter of once again agreeing on the form and conditions in which the credit will be paid.

You can do it directly with the entity’s collector or through the Superintendence of Insolvency and Re-entrepreneurship (SUPERIR) acts as facilitator of agreements between the debtor and his creditors. We suggest you read this instructions if you are in this situation. Knowing the differences, it will be easier for you to choose an option in case you are in a situation. To avoid having to repay it is important that before requesting a consumer credit you do all the necessary bills and that you choose the most suitable option for you, making sure that you can pay the monthly installments. Find out and compare.

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