Features of submitting documents for refinancing

General principles of refinancing

This process follows a clear framework developed in accordance with Central Bank guidelines. The bank's client must prove their solvency using documents requested by the financial institution. Refinancing requires determining the borrower's true income and current credit history.

In this case, refinancing and its required documents operate under the following principles:

• The opportunity to change the interest rate based on a new agreement.
• Multiple loans and borrowings can be consolidated into a single loan.
• Under certain conditions, the loan term can be extended.
• Under certain conditions, the bank may release the borrower from collateral obligations.
• A new agreement can change the size of debt obligations, as well as the general and individual schedule for debt repayment.

Refinancing is not recommended for small loans, as it incurs high costs and the new loan may sometimes be unprofitable. Only gather documents for bank loan refinancing if you have long-term loans or a mortgage. In all other cases, refinancing will be ineffective.

Collateral has specific characteristics. If the collateral under the previous loan agreement was registered with one lender, you must go through the procedure of releasing the lien or re-registering it with the new lender. In this case, the issue with the existing collateral must be resolved before signing the new agreement. For mortgages, refinancing and the required documents are discussed on an individual basis. This will require the mortgage agreement, shared-construction agreement, etc.

Standard document checklist for loan refinancing

Russian credit and financial institutions provide loan refinancing services to a borrower only if the applicant provides the following documents for application review:

• Identity document of the borrower (internal Russian passport).
• Income verification certificate – 2-NDFL.
• Reference information on the loans to be refinanced (loan agreements from any banks that previously provided you with a loan).
• If you have a mortgage, property rights documents are required, including those from Rosreestr.
• Additional documents and requirements – military ID, driver's license, surety, etc.

To determine the refinancing scheme based on the submitted documents, the bank may offer one of three options:

1. Full repayment of the remaining principal balance. In this case, the borrower pays interest and other commission fees independently.
2. Full debt repayment, taking into account the total volume of obligations. The bank pays off all accumulated interest and the principal amount in full under the new agreement.
3. Loan over-limit. At its discretion, the bank issues a new loan while fully covering the debts of the old one. The excess loan limit is provided at the borrower's free disposal, who is subsequently obligated to pay interest and due monetary payments.

By complying with the above requirements and providing the refinancing documents, you can expect approval for a new credit line from the bank of your choice.

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Brief guide to submitting documents for refinancing

To become a full participant in refinancing, the borrower must not only gather the required package of documents but also follow these instructions:

• On our financial services comparison website, choose the bank that best fits your refinancing needs.
• Prove your solvency to the new bank using the submitted documents.
• Contact your original lenders, where you signed the agreement, and inform them that you are switching to a refinancing program with another financial institution.
• Next, both parties agree to provide you with a new credit line under refinancing terms.
• Contact the new bank, submit the loan refinancing documents, sign the agreement, and begin operating under the new credit program.

In most cases, your new bank handles the organizational matters with your previous lender independently. Once current organizational tasks are fully resolved, you will be notified of the new credit line's approval. You will need to visit the bank and sign the new agreement based on the provided documents.

Document requirements for loan refinancing

Each bank independently determines its refinancing document conditions, outlining the terms and requirements for the borrower. Differences in terms can be significant or minor. We have gathered general information on refinancing terms from major Russian banks for you:

1. The maximum term for a consumer loan is 5 full years, and for a mortgage – 30 years.
2. The loan to be paid off must have been issued at least 6 months ago; in extreme cases, a loan age of 3 months is considered.
3. The total debt amount must be at least 150,000 RUB.
4. To obtain refinancing, you must provide not only the standard document package but also information on your current debt as of the application date (or within 3–5 days prior to submission).
5. The new bank independently determines both the interest rate and commissions under the new loan agreement.
6. The interest rate is determined based on two factors: the current refinancing program and credit history details.

• The bank independently specifies the application review period. As a rule, a decision is made within 14 days. During this period, the borrower must continue to fully meet their obligations to the original creditor.

These are important conditions for processing and approving a refinancing application.

Disadvantages of refinancing

Despite the positive aspects of refinancing, there are negative points that may affect the final approval by the bank that agrees to refinance:

1. Some banks set limits on combining loans. However, some may allow combining several existing loans. For example, Sberbank can combine into one loan if you have 5 active credit lines.
2. To apply for refinancing with documents, the consent of the first lender is required. Unfortunately, not all banks agree to let the borrower go through the refinancing program.
3. Refinancing, despite having all the necessary conditions for the borrower, involves additional costs, in particular, the need to pay commissions and other expenses. Carefully calculate this working point when submitting your application.
4. Refinancing generally takes longer than applying for a standard loan.

Please note that when applying for a loan refinancing at another bank, you must continue to meet your repayment obligations to your original lender. Otherwise, you will fall into arrears, which may result in your new refinancing application being denied.