What Is it loan refinancing? Here's how!

What is loan refinancing?

Loan refinancing is the practice of replacing an old loan agreement with a new one with the same financial institution, allowing for adjustments in the term and amounts contracted.

Refinancing can be an effective solution for dealing with overdue debts. When opting for this type of credit, consumers should consider that it's only viable if they're migrating to a more advantageous line of credit, with lower interest rates and, therefore, more affordable installments.

Additionally, refinancing offers financial autonomy, allowing people to get out of debt and regain control of their finances.

Loan Refinancing: How Does It Work?

Loan refinancing is a viable option for those who need a solution to deal with old debts.

It works like this: a person who already has an ongoing loan can contact the financial institution where they signed the contract and request a new loan proposal to replace the old one.

This new loan proposal may offer more advantageous terms, such as lower interest rates, longer repayment terms, or lower installments. By accepting the refinancing proposal, the individual pays off the previous contract and enters into a new agreement with the financial institution.

Loan refinancing can be a good option for those in debt, as it allows them to reorganize their finances and find a solution that better suits their needs.

However, it's important to remember that this type of credit isn't suitable for all situations. Before opting for refinancing, it's important to evaluate whether the new loan proposal actually offers more advantageous terms than the previous agreement.

Furthermore, it is important to be careful not to incur new debt in the future, which can lead to an even more complicated situation.

The loan refinancing option is generally offered to those who have taken out a payroll loan, so that they can have smaller installments deducted from their salary.

A practical example: a person took out a 72-month payroll loan. Let's say 36 of those months are already paid off. Then, the remaining 36 months can be spread over a new 72-month loan with smaller installments and potentially more attractive interest rates.

Here, the advantages are as follows:

• The installments to be paid will be smaller, over a longer period.
• The amount already paid for the financing will be released as credit so that new financing can be acquired.
• Interest rates are attractive and valid for the customer.

What do you need to refinance a loan?

Initially, to refinance a payroll or personal loan, the person must have an ongoing loan with the financial institution in question.

Furthermore, it is necessary that a number of installments be paid, so that the minimum time established by the contract can be met.

Then, ask the bank for a refinancing proposal, and you'll receive a new proposal, which is what you need to make the new payment.

The categories that can benefit from refinancing include those covered by the payroll loan, such as INSS retirees and pensioners, public servants (federal – SIAPE, state and municipal), including members of the Armed Forces, and workers in private companies.

The maximum term for refinancing is the same as for the payroll loan agreement, 84 months for INSS beneficiaries and 96 months for civil servants. However, for other agreements, it is necessary to check the specific rules to determine the maximum term allowed.

How long does loan refinancing take?

To complete the refinancing negotiation for a personal or payroll loan, a specific credit analysis is required. Therefore, the bank may request a period of time ranging from a few days to weeks.

In general, you'll receive a response regarding your payroll loan refinancing and other loans within 72 hours, but the timeframe may vary.

How many installments need to be paid to refinance a loan?

There is no specific rule regarding how many installments need to be paid before you can refinance your loan.

However, generally speaking, contracts stipulate that, in order to apply for loan refinancing, you must have paid off at least 15% to 30% of the contract. Therefore, before applying, you should consult your contract and your financial institution.

What is the difference between refinancing and credit/debt portability?

There is a big difference between refinancing a loan and porting a loan.

• Loan refinancing: as mentioned above, refinancing is when you request that the outstanding amount of a loan be divided into a new number of installments, where you pay lower rates and lower monthly payments.
• Loan portability: portability occurs when you transfer your loan to a new financial institution, meaning the amount is transferred to another institution where you will have more advantages.

Refinancing or loan portability can be advantageous, depending on your situation. Therefore, it's important to analyze both before choosing the best option.

How does INSS refinancing work?

INSS refinancing works similarly to refinancing other types of payroll loans. The main difference is that INSS beneficiaries can obtain lower interest rates and longer repayment terms compared to other customer categories.

To request refinancing through the INSS, the beneficiary must contact the financial institution responsible for the original loan.

When requesting refinancing, the beneficiary can choose new payment terms, such as payment term and installment amount, that are more appropriate to their current financial situation.

Once the refinancing is approved, the financial institution will issue a new loan agreement, replacing the original agreement. The beneficiary will continue to pay the monthly installments through direct deduction from their INSS paycheck, as with the original agreement.

Can I refinance a payroll loan more than once?

Yes, it is possible to refinance a payday loan more than once. Refinancing a payday loan allows you to obtain a new loan based on the current outstanding balance of the original loan.

This can be helpful if you need more money or want to reduce your monthly payments. However, it's important to remember that each refinance will add more interest and fees to the total loan balance, which can increase the total cost of the loan over time.

Therefore, it is important to carefully evaluate your financial situation and the options available to you before choosing to refinance a payday loan multiple times.

Is loan refinancing worth it?

Loan refinancing may be worthwhile in some situations, but it's important to carefully consider your circumstances and the terms offered by your lender before deciding if it's the best option for you.

In general, refinancing can be beneficial if you can get a lower interest rate than your original loan. This can result in lower monthly payments or a shorter repayment period, which can save you money in the long run.

Additionally, refinancing can also be helpful if you need to reduce your monthly payments to better fit your current budget. However, it's important to remember that extending your loan term can result in higher total payments, even if the interest rate is lower.

If this is your case, it is worth refinancing your loan and paying lower rates.

Frequently asked questions

[faq]