Refinancing without proof of income

If you are no longer satisfied with the terms of your loan or if you have fallen into a difficult situation and cannot make monthly payments in the same amount, you can use the refinancing service. We will explain what it is, how it differs from restructuring, when it is worth applying for this service, and how re-lending works.

What is loan refinancing and how does it differ from restructuring?

Simply put, refinancing is taking out a new loan to pay off an old one, but on more favorable terms. Its main goals are as follows:

• improve lending terms and make monthly payments more comfortable;
• increase the loan term to reduce monthly payments;
• decrease the monthly debt burden, that is, reduce the monthly payment;
• switch to a more convenient bank;
• avoid overdue debt.

Thus, with the help of refinancing, you can improve the following consumer loan terms: reduce the interest rate, increase the loan term, reduce the monthly payment amount, or, for example, switch to your salary bank. You can also use this service to combine multiple loans into one. This is necessary so that you can more easily monitor your payments.
Despite the fact that refinancing and restructuring make loan repayment more comfortable, these are different banking services.
Restructuring is a revision of loan terms in the bank where it was issued. As a rule, borrowers apply for this service in extreme cases. For example, when they experience financial difficulties and there is a risk that they will stop making monthly payments altogether. In this case, the lender can temporarily lower the interest rate, reduce the monthly payment, or write off accrued interest.
Refinancing, on the other hand, is mostly taking out a new loan at another bank. That is, its terms will correspond to the current situation in the economic market.

When is it worth refinancing a consumer loan?

Consumer loan refinancing is justified in only three cases: when you need to lower the interest rate, when it has become difficult to make monthly payments, and when you need to combine several loans into one. Let us talk about this in a little more detail.

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When you need to lower the interest rate

Consumer loan refinancing is justified, for example, if you took out your loan at 15% per annum, and then found an offer from another bank with an overpayment of 7% per annum. The sooner you use the service, the less you will ultimately overpay on the loan.
Please note that you will be able to save on the difference in interest rates only if you use the re-lending service in the early stages of repaying the refinanced loan.

When it has become difficult to make monthly payments

You can also use the service if you have fallen into a difficult financial situation or have other, more important expenses, and the current loan payment has become unaffordable for you. Then you can increase the loan term and thereby reduce the monthly installment.

When you need to combine multiple loans into one

If you are paying off two or more loans in different banks and the payment dates differ, you can refinance all these loans with a single new one. In this case, you will only have to make one monthly payment. First, this will allow you to save on commissions for transferring money to other banks. Second, you will not get confused about your loans.

When can loan refinancing be unprofitable?

On the contrary, we do not recommend applying for refinancing in the following situations:

1. When the interest rate on the new loan is about the same as the old one, or even higher. In this case, you will not get any benefit, and your overpayment will remain the same or even increase.
2. If additional commissions wipe out all the benefits of refinancing. Some banks charge an additional commission for re-lending and transferring money to other credit institutions.
3. When a large part of the loan has already been repaid. In this case, you should first calculate your benefit taking into account the interest already paid. Most likely, the refinancing service will be irrational for you.

What requirements do banks impose on refinanced loans?

Requirements for loans to be refinanced may vary depending on the bank you choose. However, they typically look as follows:

• No overdue debt on the current loan. Almost no bank will refinance a debt on which penalties have already begun to accrue. Furthermore, if you are already missing payments on your old loan, you are likely to be unreliable in fulfilling your obligations to the new lender.
• No overdue payments over the past six months or one year. This is the most common requirement. To get re-lending approved, you must not have missed a single monthly payment over the past six months or year, and your credit history must be immaculate.
• The total number of refinanced loans must not exceed a certain limit. For example, at VTB, there can be no more than six.
• At least six months must remain until the expiration of the loan agreement. If less time remains until the loan is paid off, refinancing will not be beneficial for either you or the lending institution.
• At least six months must have passed since the loan was issued. Otherwise, the lender will not be able to verify your solvency and see how you handle your credit obligations.

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How does consumer loan refinancing work?

You could say that re-lending works in much the same way as taking out a regular bank loan. However, the loan agreement will necessarily include a clause requiring early repayment of the refinanced loan at other lending institutions. This must be done within a specific period from the date the funds are received, typically within 60 or 90 days. Otherwise, the bank may increase the interest rate or apply other penalties.
Overall, the re-lending procedure looks as follows:

1. First, you need to submit a refinancing application. To do this, fill out the application form on the lender's official website or at a branch, indicating the loans you want to re-lend.
2. Next, you need to wait for the bank's decision. This usually takes 1-2 business days.
3. Then, you need to sign the loan agreement. After that, the bank will credit the funds to your personal account, from which you will then transfer the money to pay off the old loans, or the lending institution itself will pay off the debts on the loans you specified.

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Answers to frequently asked questions

Finally, we will answer the most frequently asked questions on the topic of the article.

Can you get an additional loan amount when refinancing?

This depends on the specific bank's terms. However, most lending institutions do allow you to take out an additional amount along with refinancing, provided that the total loan amount does not exceed your approved limit.

Can you re-lend a loan that has already been refinanced?

Most banks allow you to refinance any loan, even if it has already been re-lent.

Can you get refinancing with a bad credit history?

The lender makes an individual decision in each specific case, which will depend on the borrower's personal data. If your credit history is not too bad and you have not had long overdue payments, your re-lending application is likely to be approved.

Can you re-lend a spouse's loan?

No, you can only refinance loans that are issued directly in your name.