Refinancing debts, what is it and what does it consist of?

We know that getting to the time to collect your salary in the month can be a bit complicated, and more so when you have so many debts on you, for different reasons we can find ourselves in the need to apply for different loans to be able to make ends meet or to some other reason. However, the solution to all your financial problems of this type can be refinance debts And that's what we'll talk about throughout this article. Let's start.

What is debt refinancing?

We have already been saying that refinancing debts can be the solution to your financial problems, when you have a large number of payments that you cannot pay as soon as possible, this process basically consists of restructuring the different debts that you may have, to In this way, you change the amounts to be paid a little and thus you can make the load a little more bearable and be able to comply with everything without feeling suffocated by this.

So knowing this, it may seem striking to us and we would like more information about it, because first of all it is important that you know that there are different types of refinancing, which we are going to describe below, in this way, you will be able to know them and discover which is the one that best suits your needs and capabilities, let's study them.

Types of refinancing

There are three main types, after you know the information of each one, we invite you to analyze which one would be applied depending on your case so that you can go ahead with the idea of ​​refinancing debts.

Debt reunification

This consists of the first that we are going to define, but it also turns out to be the most used by users, this is motivated by the fact that it consists of reunifying all the debts that you may have and turning them into one.

In order to do this, you must go to your financial entity and request a new loan for the total amount that must be canceled, after its due approval and cancellation, use this money to pay all the debts that we have up to now and stay with the only large or unique debt, which we just applied for.

In this way, we save a little time, since being a larger amount, it can be given a longer period for its due cancellation, therefore, the monthly amount to be canceled will be less than what you are paying for the moment. and you will have much more order, since it will be a single payment and a channel generating interest that must be paid month after month in the agreed installments.

Debt Novation

This second type of refinancing consists of negotiating directly with the bank, at this point you can become your best ally to get better rates for monthly payments, in this way, you face the bank trying to find an agreement with it, and avoid not make any more payments, which could generate serious consequences for the banks.

Basically what you are looking for is to change all the conditions that could be given in the beginning with respect to the loan and try to change them so that they can be a little more beneficial for you as a client. Generally, all the people who have opted for this type, what they manage to achieve with the negotiation is to increase the repayment period, in order to considerably reduce the monthly installments.

debt subrogation

If after trying to novate debts, the conditions that were reached after the negotiation still do not seem the most comfortable for you, you can choose to take your debt to another bank, which offers you better benefits, this type refinancing is very common for mortgage cases. So it is important that you analyze very well if this could be the best decision based on your case.

Which type of refinancing is best for me?

Answering this question can be a bit complicated since it will totally depend on the main interest you have with it. Because if your case is that you have many small debts and for each one you make the corresponding payment of interest or commissions, the best thing is that you ask for a reunification of debts, in this way, you turn it into a single debt with a single interest payment, This can be very beneficial to you.

If you are only looking to get better conditions for your previously requested loan, trying to extend the term given to be able to make the full payment of the loan, your best option is to apply for a debt novation. Finally, if you manage to discover another banking entity that offers you better benefits and conditions for your credit, what you can do is apply for a debt subrogation.

So the best way to answer this question is by saying that it totally depends on what you are looking for, you will have three options that can be adapted to your needs.

You may find it interesting to know the differences between transfer and transfer, two concepts that many people consider synonyms but that actually have very different meanings and that it is very important that you know, if you want to know more details you must enter the link that we left you before, in this article you will be able to have it all complete and detailed. Don't stop reading it, it will only take a few minutes.

Recommendations to refinance debts

We know that at this point you may feel a little overwhelmed or stressed, you may not know what is best or where to start, for this reason, we leave you this series of recommendations which you can apply and in this way manage to refinance debts in an easy way. satisfactory.

plan your economy

We name this point first, because it can be very important. Since your main objective should not be to reach the need to refinance your debts, rather you should have a planning of your economy that allows you to comply with all the debts that you have been able to acquire, because we know that we all need help at some point. and able to ask for a loan or make use of a financing plan may be the best option, but the important thing is that you should not fall into over-indebtedness under any circumstances.

Know your situation in detail

This may seem a little contradictory to you because you have every right to say, who does not know their financial situation or is not aware of the money they receive monthly, because this can happen more frequently than we think and this is what can bring problems to people, since they face higher expenses than they can really cover.

set limits

You must know precisely your budget and your financial situation, since the only point you must take into account is not how much you earn, but also how much you spend, this will influence the fact of setting limits correctly, and in this way you can avoid having an over-indebtedness that will not help you at all.

Balance the cost of refinancing

In the event that the situation got out of hand and your only alternative is to make use of refinancing, you must be aware and aware that the opening and closing of loans has a cost, for this you must pay certain commissions and interests, therefore, it is important that you evaluate this previously and in this way be able to deduce if it is indeed your best option.

Configure the repayment periods of the new loans that you acquire

Depending on the monthly budget that you may have, where you make the proper evaluation of your expenses and income, you will be able to correctly choose the reimbursement periods of the financing plans acquired, since you will know how much is the monthly amount that you can cover without have problems to be able to cover the rest of your expenses.

Something that, perhaps, unknown up to this point and is quite important, is that if your financial situation improves, that is, they increased your salary or you changed jobs to one where the salary is much better, you can make larger amortizations or which is also known as "Early Repayments" in this way, you can reduce that term that was determined at the beginning.

Choose a good entity to negotiate

Almost every time the reunification of debts is usually done by what is known as negotiating entities, for that reason, it is so important to be able to choose one that best suits your needs and that cares about you, providing personalized attention to each one of their clients to help them with each of their problems, in addition, to be able to choose one that does not have too high commissions.

Reunify major to duty

And if you actually fell into this problem and you are already heavily indebted, carrying out a debt reunification may be your best alternative, that is, you must previously have a sincere planning of expenses, so that in this way you can heal your economy.

We know that everything that has to do with the administration of household expenses can be quite complicated for many people, so we recommend that if it is very difficult for you to do it, you can hire the services of someone who can do it for you. , and can support or guide you until you feel safe enough to do it on your own.

In the same way, we also recommend that you seek help from a professional if the issue of debts has gotten out of hand, this person will be able to help you make the best decisions and look for the most appropriate alternatives based on your case, so do not hesitate to call him, he can be very helpful, sometimes we must admit that we cannot do it alone.

We know that this can be a fairly extensive topic, it has a lot to talk about and many recommendations to give, we hope we have been able to provide you with all the most important information so you can know how to refinance debts. But as we know that additional doubts can always arise or you simply want to know a little more about the subject, we leave you the following video below so you can take a few minutes and view it.