A refinanced loan is a relatively new service on the financial market that is gaining increasing popularity. Let’s look at the word “refinancing” because it is the key issue. Well, refinancing consists in acquiring additional, external sources of financing in order to replace funds already spent for some purpose. In other words, new obligations are incurred to pay off the previous ones. A refinanced loan is useful even when we are unable to pay back a loan in a company. We can then apply to refinance this loan with the service provider.
Refinanced loan – for whom?
Loans, primarily granted electronically, sometimes have fairly short deadlines, e.g. monthly. This is the period in which all liabilities should be settled – both the sum borrowed, as well as interest and commission. Borrowers usually cope with timely repayment obligations, however, sometimes there are situations in which they arise in problems with settling loan obligations. Of course, it is always possible to apply for a loan extension, but this option does not always suit everyone.
That is why a refinanced loan appeared on the financial services market. It is eagerly used by non-bank companies, giving borrowers another tool to help repay liabilities according to agreed conditions. As mentioned before, refinancing involves a new commitment to settle previous ones.
It usually comes down to the fact that the borrower collects funds in a completely different company to transfer them to the lender with whom he has established cooperation so far.
Refinanced loan and service providers
In the case of a refinanced loan, we are talking about three sides. The first is the borrower, while the second and third parties are separate companies, which are obviously lenders. These companies settle formalities (primarily the borrower’s debt) with each other, so after using a refinanced loan, all liabilities should be settled with the company that granted the second loan – for repayment of the earlier one.
In addition to the existing receivables, you also need to remember about the refinancing cost that occurs if you use this type of service. It is worth emphasizing that the money obtained from refinancing cannot be used for other purposes. These funds must be used only to pay off previous commitments. A refinanced loan offers much wider room for maneuver. First of all, its advantages should be attributed to the ability to pay previous obligations on time.
This avoids accruing interest – the loan is regulated as agreed. Yes, there are new obligations for the second lender, but the formalities with the first lender are now regulated. Of course, you must make sure in advance whether the company in which you want to use refinancing allows you to provide such a service. If so, each borrower has the option of submitting an appropriate application.
How to apply for a refinanced loan?
The first step is to make this difficult decision, after all. However, it is very beneficial when there is a spectrum of problems with repayment of existing obligations within a time limit agreed with the lender.
Most companies that refinance loans require the submission of an application before the end of the loan period. You can usually do this in two ways – online (via the provider’s website) or at the lender’s facility.