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We know that, in the reality of many countries around the world, most people are in debt, whether it is loans, credit cards, or even financing.
As common as it is, some people end up getting financially complicated and the debt starts to weigh heavily on their pockets.
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When this happens, some renegotiation measures can be applied. Refinancing can be a good option to put finances in order.
The solution improves the contractual conditions and even lowers the interest rate, being a healthy alternative to credit.
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So, find out the 5 best ways to refinance your debt and how this alternative can solve your financial problems.
Best ways to refinance your debt
Refinancing is nothing more than replacing the old loan agreement with a new loan agreement with the same bank, allowing the agreed term and amount to be modified, being ideal refinance your debt.
Thus, it can be the perfect solution for getting rid of bad debts. The idea of this practice lies in empowering people to get out of debt and regain control of their finances.
In this way, debt refinancing refers to the ability to renegotiate your contract with the same bank or lender with which you originally contracted.
Before opting for refinancing, the consumer must ask himself if this is really a more convenient option than the previous one, that is, if the conditions are more favorable, more adequate, or fit better with his budget.
How does debt refinancing work?
In consumer finance, there is a line of credit that is used for a specific purpose, such as the purchase of a car or property, while in refinancing, assets are used as collateral.
This type of operation is useful when budgets get out of control or unexpected events occur. Thus, the debt will be refinanced with the same bank or creditor that you wish to obtain the best contractual conditions.
To do this, you must contact the entity that originated the debt and express interest in renegotiation, allowing the analysis of the best rates, terms, and amounts to fit the debt into the budget.
Main Benefits of refinance your debt
Besides being able to keep your debt within your budget, there are other benefits of renegotiation. Take a look of the benefits of refinance your debt:
- Cutting red tape: Since you will be financing with the same bank, the process is much easier than hiring a new lender.
- Fast release of credit: If you refinance your loan on the condition that the agreed amount is increased or changed, the amount will be credited to your account more quickly. Since the financial agent already has all the information needed to grant the credit.
- Changing an agreed upon value: It is always possible to change a previously agreed upon amount to get more credit.
- Flexibility of deadlines: In addition to obtaining a larger refinancing amount, the terms can be modified to increase the number of installments.
What types of debt can be refinanced?
Now that you know how refinancing works, here are some examples of where to refinance your debt.
1. Real Estate
If your property has past due installments, you can apply for to refinance your debt with the bank. Many banks are flexible when it comes to negotiating late payments, and some even offer a grace period to pay off debts.
Refinancing real estate, or the loan with real estate as collateral, is similar to the process done with vehicles. Because it is an asset, the credit analysis is more laborious, so it takes longer to release the money.
But because it is a permanent asset, the amount released, and the payment term are longer. This line of credit is for people who own real estate and intend to use it as collateral for better payment conditions.
Refinancing real estate is in high demand for investment and business growth, as well as to settle debts and adjust your finances.
2. Vehicles
If you have already bought a vehicle and cannot pay the installments, you can contact your to refinance your debt on bank to try to accept the new payment conditions.
A vehicle refinance, also known as a secured vehicle loan, is a line of credit in which a customer puts his or her car as collateral in a transaction.
By putting the movable property into the contract, better payment terms can be obtained, such as lower interest rates and longer debt repayment terms.
The client must have a car in his name and have all vehicle documentation up to date. If there is an open debt, or even a pending project such as IPVA in arrears, part of the requested amount will be used to pay off the debt and the rest will be sent to the applicant’s account.
This line is also widely used for purposes other than debt settlement. Since the use of the money is free and the customer does not need to direct it, many uses it to invest in their own business.
Other areas of interest are studies, health expenses and acquisition of other goods.
3. Consigned loan
It is also possible to refinance your contract and start a new one with a new rate or terms or even an agreed amount through a consigned loan to refinance your debt.
The refinancing of the consigned loan can be done by retirees, pensioners, public servants and employees of private companies.
When you refinance a payroll loan contract, the installment amount will be automatically deducted from your payroll.
This means that the more payments, the higher the amount (limit) released. The amount released will always be in relation to the amount actually disbursed on the current loan.
Top 5 Best ways to refinance your debt
With that in mind, we will present to you 5 best ways to refinance your debt. Take a look:
1. Search the available options
Check the conditions of the contract. Details such as payment dates and deadlines, penalties and fines for late payment are very important to refinance your debt.
2. Read the contract carefully
You should also confirm that no services, such as lines of credit or loans, have been added to the contract to refinance your debt.
3. Write down the actual value
The most important principle overlooked is to write down all financial obligations.
This step is important to correctly understand the value of outstanding balances, interest, and other liabilities until we know the best possible alternative for renegotiation.
4. Prioritize Larger Debts
It is often easier to pay off smaller debts first, but the tip here is not to let large debts accumulate interest. High interest rates and outstanding debts (such as credit cards) are largely responsible for putting pressure on the financial health of people who are already in debt.
5. Reduced payments
Many people have the illusion that making larger payments is beneficial, but basically, the more frequent the payments, the greater the financial commitment of that debt.
Therefore, reducing payments is positive in order to better deal with interest and taxes.
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