Refinancing a loan is a solution often offered by loan companies. It can be said that it replaced the prolongation of the payback period, which was popular earlier – it is a similar service and very often used by borrowers. However, it is the same financial product and its use requires reason, calculation and sober judgment like making any other commitment.
How to get a payday loan online?
Defining a refinancing service should begin with a description of the mechanism for extending the repayment period of a loan – once quite common, currently occurring only in a few companies. The extension of the repayment period takes place within the same lender company. For a fee, the company grants the borrower permission to repay the loan at a later date, without charging penalties for default and incurring other consequences.
Refinancing, on the other hand, is de facto the granting of a second loan by another lender. Usually, it is a lender cooperating with the original company, and the money from the second loan does not go to the customer, and immediately to the first institution. In this way, the customer remains with the second loan to be repaid. From his point of view, refinancing is therefore similar to the extension of the repayment period, except that the party to the loan agreement changes.
Let’s pay attention to refinancing costs
The anti-usury law has introduced a maximum ceiling on total costs, which can not be exceeded. It amounts to 25% of the capital amount of the loan and an additional 30% of the resulting amount per annum. Therefore, loan companies, which pay the costs of paid loans in the vicinity of this limit and not wanting to exceed it, could either completely abandon the possibility of extension or refinance.
Refinancing is therefore a paid service and these are not small amounts, because they usually amount to the second as much as the loan cost. It is good to know them before borrowing, but not all companies provide such information – they will be visible only after logging into your customer profile on the site after borrowing. However, you can always ask a company consultant who has a legal obligation to answer this question (based on the Consumer Credit Act).
Protect yourself before taking the loan
Both the extension of the repayment period and refinancing are granted for a similar period for which a loan has been drawn – usually 30 days. There are some variations of this period (eg 7, 14 or 21 days), but this is not so often. From a simple account, it appears that the borrower will take maximum advantage of 60 days to repay the payday loan. Therefore, if it is assumed in advance that financial perturbations will make it impossible to repay within a month, it is better than refinancing, if you are interested in a short-stay, which is granted for two months. Loan institutions that offer such a solution include Wonga and Fast Cash.
The free minute is no longer free
Borrowers are often driven by the desire not to incur any costs associated with the loan. That is why free kiosks for new customers are so popular. However, you must be careful when the lack of costs is the only or the most important criterion for choosing a loan and no deeper analysis of your financial options is followed. Refinancing a free payday will make such a break free of charge. In this situation, it is easy to fall into a loop of loans, and each of the next one will only increase the debt.
Refinancing is not the only option?
You do not always have to refinance to pay off the loan at risk. However, other methods also involve taking another solution or … avoiding its repayment. It is true that the responsible lender should not allow such a situation to arise, but it is understandable that avoiding the consequences of non-repayment may be a priority.
The practice of some borrowers is simply not to extend the repayment period and not to use the refinancing option. The simple calculation comes to mind – a slight delay will generate low costs compared to how much you will have to pay for refinancing. However, two conditions must be met: it can not be a free minute, and the delay must be really short, at most a few days. However, such behavior is very unreasonable and risky.
Another way, a safer but further burdened with a lot of risk, is to pay off your payday with another, but free. This solution is not recommended in any way, not only because one loan is paying off another, but it is not a reliable solution and it has to be dealt with in advance. Imagine that in one company we have not received a loan, so we report to the second and even to the next one. Time flies and, before you actually get a loan, the first one can expire and it will no longer be possible to refinance.
The best option, if you do not want to use refinancing, seems to finance the repayment of the payment by installment loan. It is true that it will not be a free solution and will not remove the debt, but will postpone its repayment in the future. Just like any other loan, it is not a remedy for short-time problems, but only an auxiliary, which must be used sensibly.