REFINANCING DEBTS
Have you ever ask your self one or more of these questions? Here in ZX9 Play Blog! We give you answers to these questions and also provide our recommendations about debt refinancing.
What means refinancing?
Refinancing is nothing but asking for a new loan to pay our previous loan, for example: If we have a mortgage with a bank to which he had borrowed (USD: 100,000.00) one hundred thousand US dollars for the acquisition of a family residence and at the time of application and approval of the loan we had steady income that allowed us to honor the payment agreement made with the bank by contract, but by random circumstances in a time period in which we are paying off the mortgage loan our revenues see a reduction or our expenses increase and our revenues remain static or in any other case such as inflation, etc. If we can not honor the agreement to pay for some or other of the above reasons we can opt to refinance our debt.
Why would we refinance our debt if we are in the middle of one of these situations?
We can refinance our debt in pursuit of reducing interest rates, we can arrange with the bank to extend the time in which we will be paying our loans seeking to reduce monthly interest generated. Please note that the extension will increase the total debt outstanding at the end, capital + interest, which could ultimately result in a non-viable option for many people. But as mentioned earlier this is a situational option.
How we can refinance our debts?
We can make a refinance directly with our creditors, in this case the bank issuing the loan that we are paying at the moment and we want to refinance.
As another option we have the ability to contact another financial institution, as it could be another bank. Looking for that third bank issuing a new loan to pay off the loan we have with the second bank. This option is known as debt consolidation and must consider whether the bank issuing the new loan gives us a solution to our needs, for example: interest payable monthly are lower than the interest we are paying at the moment of asking for refinancing our debts. We not do nothing prolonging the debt if our current situation will not improve.
Recommendations:
We always recommend evaluating several options, explore all the possibilities available, we must never choose the first option, it is good to hear all voices before making a decision.
We recommend advise with finance professionals choose when to refinance debt.