What is microloan refinancing
Refinancing is the issuance of a new loan or loan to pay off existing debt on more favorable terms. This concept should not be confused with restructuring. In the first case, this is a new loan, in the second, a change in the parameters of an existing loan.
Thus, refinancing is a targeted type of loan product and is aimed at paying off a specific debt, documents for which must be provided to the new lender. Most often, refinancing is offered by banks, but it rarely applies to microloans, only to loans and credit cards.
Few microfinance organizations refinance microloans. But the market is constantly growing and developing; in pursuit of clients, microfinance organizations are expanding the range of their services and are ready to offer borrowers various types of loans, including refinancing. Most companies lend online without refusal, with positive reviews.
Requirements for borrowers
When refinancing at an MFO, the client is subject to requirements that are similar to applying for a regular microloan. You must have citizenship, be over 18 years old and have a stable income. The only documents you will need are a passport.
The bank has stricter requirements. In addition to citizenship, registration, and suitable age, the borrower must have official income from hired employment or entrepreneurial activity. The client’s solvency is also taken into account.
What loans can be refinanced?
Requirements for refinanced loans are established by the bank or microfinance organization at its discretion. When applying for a microloan, it is possible to consider debt with short-term overdue payments and a damaged credit history, but the cost of such a service will be significantly higher. If we talk about refinancing at a bank, certain restrictions are placed on the products, and overdue debt is unacceptable.
It is advisable to refinance microloans only if you receive a tangible benefit, for example, a reduction in the interest rate or the amount of the monthly payment. It is also necessary to adequately assess your financial capabilities. Refinancing is not a panacea if the client does not have stable sources of income. We recommend that you carefully study the offers, compare the conditions, and calculate the overpayment.