Reaching the end of the month is a concern for many people, especially in those cases where the level of indebtedness is high. This is much more common than it seems and can lead to especially serious situations. If you are in such a case, refinancing debts may be the solution.
On this occasion we are going to tell you how debt refinancing works and we will give you some tips so that you do not overdo it and do not have to need this measure.
What is debt refinancing?
It is an alternative to restructure the different debts that a person has in order to deal with them more comfortably and without financial difficulties. It is a good measure for someone who has problems with their economy and does not want to get to the point of appearing in delinquent files.
But not all refinancing works the same, there are several assumptions that it is important that you know.
Types of refinancing
It is one of the most used modalities, it consists of converting all debts into one . What is usually done is to request a loan for the amount owed, cancel all loans or credits with that money and keep a single debt. This way you get more time to pay, which at the same time reduces the monthly fee .
We believe that we have no power to negotiate with banks, but it is not so. The bank prefers that you negotiate with him and give in some things before having to face that you are not going to pay him .
With the novation of debts, what is done is to negotiate with the bank to change the terms of the loans and make them more favorable . In these cases, what is usually achieved is an increase in the repayment term, which automatically reduces the monthly installments.
If the negotiation with your bank does not work, what you can do is take your debt to another entity that offers you better conditions . This is especially interesting in the case of mortgages.
What type of refinancing should I use?
The way you collect debts you use depends largely on what you are looking for with it. If you have several outstanding loans and you want to pay a single installment , then the best option for you is the reunification of debts.
If you simply want to get better conditions for your loan you should choose the novation. However, if there is another entity that offers you better conditions, then bet on subrogation and change banks.
Tips to refinance a debt
Control and plan your economy
Ideally, you should never reach the situation of needing such measures. To do this you must make a good planning of your economy and determine how you will use your resources . It’s about being able to live well without over-indebtedness.
Know your situation in detail
We often get into bad economic situations due to carelessness and lack of foresight , this is basically because we do not analyze our economic situation well and believe that we can face more expenses than we really can.
Set your own limits
Each person has a different economic situation. It’s not just about what you earn, but what you spend. In fact, what you spend is much more important in your economic situation than what you are entering .
If you analyze your financial situation well and know it in detail, you can set personal spending limits that will help you avoid excessive indebtedness.
Weigh the cost of refinancing
If you have too many loans and reuniting debts is the last alternative you have left, examine all the details well, do not forget that this operation also carries a series of associated costs such as the costs of opening and canceling loans.
Adjust the repayment term of the new loan
If you have analyzed your economic situation well, you will know how much you can spend per month, which will allow you to better choose the return period. If you have many problems right now to reach the end of the month, it is better that you choose a longer term to reduce the monthly fees .
Keep in mind that your economic situation may improve in the future, so you can always make early repayments so you don’t have to spend many years paying the same loan.
Choose a good negotiating entity
Debt reunification is usually carried out through negotiating agencies. Be sure to choose one that really cares about finding a personalized solution to your problem and whose fees are not too high.
Better reunify than duty
Debt refinancing is a very valid and useful alternative in situations of over-indebtedness. However, it is best that you do not have to face this situation. And for this, the solution is to plan your expenses to have a healthy economy .
Sometimes it can be complex to manage and control household accounts. But you can always count on specialists to help you create a customized savings plan . Remember that prevention is better than cure.
In case the situation of over-indebtedness is already irremediable, it is also advisable to put yourself in the hands of a professional who analyzes your situation and helps you choose the best option to solve your debts.