The bank is refusing refinancing — what you should do

The loan refinancing process

The desire to refinance a consumer or mortgage loan originates with the borrower. The person sees offers from other financial companies and realizes that their current interest rate is at its maximum.

Other situations occur: the borrower wants to reduce monthly payments and extend the contract term due to a sharp drop in income.

Some clients take out secured loans. Refinancing is an opportunity to lift encumbrances from collateral property.

The process of refinancing consumer loans or mortgages takes place in the following order:

• Sign up for a consultation. Or get answers to your questions by calling the hotline.
• Drafting a refinancing application.

The request for refinancing must be supported by arguments. For example, the service has become cheaper over the period of using the loan. So why should you pay more if other clients pay less for the exact same loan...

Other institutions offer more favorable financing conditions — another argument you can use to justify your request.

If your financial situation has genuinely worsened, attach available certificates to the application and ask the bank to reduce your debt burden.

Good to know! Borrowers with an immaculate credit history can count on refinancing a mortgage or another type of loan. Other clients may face rejection.

Reasons why a bank may refuse

Russian law does not obligate lending companies to disclose the reason for refusing refinancing.

Refinancing is most commonly denied in the following cases:

• Negative credit history. This occurs if the borrower allows overdue payments exceeding 10 days. Financial companies send all information about interaction with the client to credit history bureaus, and it is accessible to any bank.

Good to know! A neutral history also increases the likelihood of a refinancing refusal.

• Low creditworthiness. If financial institutions, after checks, discover that the client is unable to pay off the loan, refinancing will be denied.

Also, frequent applications to microfinance companies are undesirable. One to three loans will not affect the banks' decisions, but regular requests to different companies may arouse suspicion. This is evidence that you frequently lack funds.

• The value of the collateral has dropped significantly. This fact will play a special role when making a decision on refinancing a car loan or mortgage.
• The collateralized real estate has an unauthorized redevelopment. To avoid problems, all changes must be approved by the relevant authorities.
• The received loan is not eligible for restructuring under the refinancing program.

Vyacheslav took out money for a term of 5 years, but he was not satisfied with the interest rate, and he applied for refinancing. He was denied because his loan did not fall within a certain range. According to the program terms, loans issued at least 1.5 years ago can be refinanced. However, Vyacheslav had only been using the loan for 6 months.

There are other cases when financial institutions do not want to replace an existing debt obligation with a new one: divorce of spouses, lack of insurance, use of maternity capital when taking out a loan.

Why was there a refusal if the credit history is good

If you have a neutral history, it is not a fact that every bank will give the "green light" to refinance a loan. Even with such a credit history, you can get a refusal, because very responsible clients also do not suit such organizations.

Alexey Nikolayevich took 1,000,000 RUB for a term of 3 years. But it so happened that he paid off the loan twice as fast. That is, the bank expected to earn 90,000 RUB from the client, but earned only 45,000 RUB.

Unspoken reasons

There are several unspoken reasons why banks refuse refinancing to borrowers with a good rating.

• An incomplete package of documents was provided, or certain certificates made the manager doubt their authenticity.

Never provide false information to a financial institution. It can blacklist you and send this information to other organizations.

Note! No one will "execute" anyone for an accidental typo, but serious deception will entail a lot of trouble.

• The loan has already been refinanced once (it is difficult to find a bank that will agree to refinance a loan a second time).
• The loan was restructured — evidence of the client's low solvency.
• You are an individual entrepreneur or work for one. Due to high risks, banks prefer not to deal with individual entrepreneurs.
• An incompletely or incorrectly filled out application form (missing phone numbers, for example).
• Having a criminal record — it casts a shadow on your financial stability.
• Frequent job changes.

According to banking logic, if a person changes jobs frequently, it means they may have money problems. Financial institutions usually specify a minimum work experience in the borrower's requirements. If you change jobs several times a year, this factor can work against you.

• Unpaid alimony and utility debt.
• Having more than 6 loans. Usually, from 1 to 6 loans, including credit cards, are eligible for refinancing.
• The client's family composition has changed and new "eaters" have appeared. Although large families can use preferential programs, not all companies participate in them.
• Unclear how, but a bank employee managed to find out that the client has a serious illness that may prevent them from fulfilling their obligations. Although personal information is not subject to disclosure, banks know how to obtain it.
• Pension or pre-retirement age. Financial companies rarely refinance people over 65 years old.
• Nature of activity. Citizens whose work poses a risk to life often receive refusals.

Note that the reasons for refusal of refinancing almost 100% coincide with the criteria for rejecting consumer loan applications. There are many other reasons, and each bank has the right to establish them independently.

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What to do in case of refusal

If you want to urgently refinance a loan, apply to different financial institutions. Positive responses from several banks will allow you to choose a profitable financing option.

If your efforts are unsuccessful, try doing the following:

• Wait 3 to 4 months. The time is short, but changes in the organization can be significant. For example, a new refinancing program will appear, or the conditions of the old one will be adjusted.
• Pay off all your debts, no matter what they are: alimony, utility bills, traffic tickets, or parking fines.
• Apply for a secured loan. Most institutions approve such requests.
• Try to refinance a portion of your debts. For example, if you have 6 loans, ask for funds to cover 4 debt obligations.
• Get a credit card. This is a last resort, as credit cards often carry very high interest rates.
• Contact a broker.

Some financial experts advise turning to MFIs for help, but microfinance companies are unlikely to refinance loans. They disburse small amounts for short periods. However, it is worth a try.

Finding a loyal bank

If you keep getting rejected, dedicate as much time as possible to finding banks that are more lenient toward borrowers.

Pay attention to the following organizations:

• Home Credit. The bank is ready to allocate up to 1 million RUB to cover debts at a rate starting from 7.9%. The application process is online using just a passport. In certain cases, the financial organization may require additional documents confirming income. It all depends on the requested amount.
• MTS. Here you can borrow up to 5 million RUB at a rate starting from 6.4%. The financing term is 5 years, and the bank makes a decision in 1 minute. Credit cards, cash loans, auto loans, and purchase loans are eligible for refinancing. To increase your chances of approval, fill out the online application on the website.
• Alfa-Bank. The organization offers refinancing for a term of up to 7 years. The amount is 3 million RUB. The rate is 9.9% for the entire loan term.

The Alfa-Bank website features a calculator that helps calculate loan refinancing. Enter the amount of your current loans, the monthly payment amount, and the loan term.

Banks with the lowest refinancing refusal rates

There are no financial organizations in Russia that approve 100% of client applications, but finding banks with the lowest rejection rate is realistic.

Interprombank refinances loans from other organizations at an annual rate starting from 9.7%. The service is available to residents of Moscow and the Moscow region. Any number of loans can be refinanced, provided the total amount does not exceed 1,100,000 RUB. Requirements for borrowers are standard: age up to 75 years, registration in the Russian Federation, residency in Moscow or the Moscow region, and a steady income (even a pension qualifies).

Rosbank offers loan refinancing, lower interest rates, and reduced monthly payments. The interest rate starts from 6.9%, and the amount is up to 3,000,000 RUB. Mortgages can also be refinanced at an annual rate starting from 6.49%.

If you are experiencing difficulties paying your current loans, seek help from Citibank. It imposes loyal requirements on borrowers and requires a minimal package of documents.

To keep rejections to a minimum, prepare the necessary documents in advance before going to the bank; the list is available on the official website of the institution you plan to apply to. If you took your agreement seriously, made no overdue payments, and have a permanent job, your chances of getting a new loan to pay off old debts are high. In 95% of cases, banks approve applications from responsible clients.

The desire to get money and pay off old debts is normal. Your chances will increase significantly if you remain yourself when visiting the bank and talking to the manager. Try to get rid of tension and do not be overly friendly. Stay calm and you will succeed.