Credit refinancing. How to refinance a loan

Among other things, in the process of refinancing loans, banks lure solvent customers from other banks. Therefore, refinancing conditions among other credit products tend to be of particular benefit to bank customers.

Conditions for refinancing a loan with banks

Conditions for refinancing a loan with banks

The positive side of refinancing of loans in online banks is:

  1. Possibility of lending to rather large sums of money: up to 30 – 50 thousand dollars without income certificates, up to 100 – 200 thousand dollars with income statement, but without property collateral, and in the presence of property collateral – and for a larger sum .
  2. Loan refinancing conditions for loans, both in interest rates and in terms of lending.
  3. Bank clerks are likely to deal with debt repayment on the old loan and its complete closure.

But at the same time, the conditions for refinancing loans from banks are very stringent, and far from available to borrowers. For example:

  1. Banks tend to only lend to solvent borrowers. If the applicant’s credit history is flawed and there is a late payment on the available loans, such a bank client will probably be denied credit.
  2. During the review of the application for refinancing of the loan at banks, the applicant is strengthened to check the solvency, which may take up to 2-3 days. Therefore, subject to the appeal to the bank, the issues of promptness of borrowing money go into the background.
  3. To refinance a loan through a bank, you will need to collect and provide a sufficiently broad list of documents:
    – identification: passport, IDN card; for small businesses – a certificate of state registration, documents confirming ownership;
    – confirm solvency: certificate of income (six months, one year) from the place of work, tax inspection, social security body; for small businesses – financial and tax statements for a two-year period, statement of account for a year;
    – Documents for valid (declared for refinancing) loans: credit agreements, all annexes thereto, receipts for payment of regular payments, certificates of debt.

After all, bank refinancing is not available to all bank clients. And only to those borrowers who:

A) are fully solvent and capable of servicing the new refinancing loan in full, regardless of temporary difficulties and the size of the cash gap;

B) are financially disciplined and have no significant delays in payments on previously taken loans (have a positive credit history);

C) have the time and patience to go through the whole difficult refinancing loan banking process.

And what to do to other borrowers who at one time did not have the perfect credit history, or who need money for lending very urgently? Faster than can be obtained through the bank?

Quick refinancing of a loan through micro finance organizations

Quick refinancing of a loan through micro finance organizations

 Fortunately, you can refinance your loan online through another specialized microfinance organization. However, a number of features indicate that the micro finance organization option is ideal for lending in cases of temporary, short-term cash gaps, or in emergencies. A number of objective factors push this conclusion:

A) Factors that indicate the benefits of refinancing micro finance organization loans over banks :

  1. The high availability of micro finance organization loans for a wide range of individuals and legal entities, including those with “corrupted” credit histories of BFIs, as well as the ongoing problems of confirming their solvency. The peculiarity of the IRF loan is that it is a shortened procedure, during which only a reliable identification of the borrower is carried out. While the verification of its solvency (with the provision of the entire package of supporting documents) in explicit form – is not carried out. If such verification is carried out by micro finance organization software (on available electronic client bases), then the peculiarities of its conduct and methodology are a trade secret of the financial company.
  2. Very high speed of obtaining refinancing of credit through micro finance organizations. For example, it takes about half an hour from the time you apply for a loan with an micro finance organization to transfer money to an electronic bank card (getting the borrower full control over the loan amount). Such high speed of credit operations, when dealing with classic banks, is simply unattainable! “Fast money” is especially required when refinancing loans from individuals, other companies and non-financial organizations. Because late payment of debt in areas with close interpersonal relationships can lead to catastrophic consequences in terms of undermining the goodwill, which later you will not buy and recover.

B) Factors that negatively affect the attractiveness of refinancing micro finance organizations:

  1. The relatively small amounts of micro finance organization loans require several microfinance companies to apply for a large amount of lending at the same time. Thus, with the help of a micro finance organization refinancing loan, the task of consolidating several old loans into one new loan is unlikely to be solved.
  2. Increased interest rates on micro finance organizations ‘credit products, which make them less financially viable than banks’ credit products. This factor encourages the refinancing of loans with micro finance organizations services only for short periods of time, to obtain better terms at another banking institution, or to improve the credit history of BFIs.
  3. The actual refinancing of loans, that is, the payment of debt for the complete “closing” of old loans (loans), at the expense of the micro finance organization loan received, will have to deal with the borrower.

Which bank is better to take a loan from. Where better to get a loan

But where to get credit online for small business? Often, sole proprietors (IPs) and private enterprises (PPs) do not have sufficient liquid collateral to take out a bank loan. In addition, if a small business is a young startup who most needs borrowing money for a quick “promotion”, entering the market, then he falls under the credit restrictions of banks.

Why so? Because banks are primarily interested in the interests not of the business but of their own credit risks. In terms of banks, the “young” business is too risky to lend to it. Therefore, under existing restrictions, the state registration of an IP or a PP should be at least two years (such as a common banking practice).

 

Business loans

Business loans

What should an entrepreneur do? Identify yourself in banks as an individual? But then for a large amount of credit in the bank, without the presence of collateral property – do not count. And the amount of credit that a bank can rely on without a mortgage on an individual is usually not enough in the interests of business development.

But start-up businesses that do not have the opportunity to “start” and “promote” their business “fat pad” at their own expense, as well as other small business representatives – should not be discouraged. The current financial and credit market is quite diverse, and practically everyone on it will be able to find a loan product for their needs.

Conditions for granting a loan to small business in banks

Conditions for granting a loan to small business in banks

In classic (network, retail) banks undoubtedly councils of representatives of business, including small. After all, the most important parameters for assessing credit risks (identification, financial status, operating activities, solvency) are much easier to trace and analyze than the same parameters in individuals. Thus, especially for individual entrepreneurs and small private enterprises in large and medium-sized network banks, there are numerous programs for granting loans to small businesses without the presence of collateral property, the main features of which are:

  • increased (compared to conditions for individuals) bank loan amounts, from 50 thousand dollars and above (on average about 300 thousand dollars);
  • extended terms of use and repayment of the loan, up to 36 months;
  • renewable overdraft lines of credit.

But small business executives who want to deal with banks should be prepared to ensure that, before deciding on a loan, they will be required to carry out a very thorough (documentary, factual) verification of their current availability, operations and financial condition the legal person – the applicant. To do this, along with the loan application, to study and analyze the bank must provide:

  • title documents for IP or PE (state registration certificate, ownership documents);
  • financial and tax reporting for the last year, some banks – for two years;
  • statement from the current account for the last six months, some banks – for the last year;
  • Certificate of BKI on the absence of credit debt on a legal entity for previously taken loans;
  • among other things, other documents may be required as required by the particular bank.

Often, a bank that lends to a small business requires that it transfer its operating activities (open a settlement account) to a lender bank. This is due to the need to minimize credit risks, but at the same time also aims to increase the profit of the bank (due to the payment of bank servicing of the enterprise).

However, the documentary verification of the IP or PP status of the bank to the applicant is far from exhausted. Most likely, the bank will be assigned (and conducted) the current inspection of the availability of production, warehouse or office premises of the PP at the place of its registration, carried out in them activities in accordance with the profile, the presence of residues of products or goods in the warehouse, and other issues.

Thus, making a loan to a small business at a bank translates into a significant expense over time, sometimes making more than one business day. In today’s business environment, when decisions are made and business operations are conducted most often in a matter of hours, such as low efficiency of banks to lend to small businesses can be considered unsatisfactory.

After all, in what cases can the credit-financial interaction of small businesses with banks be justified? Undoubtedly, in the case of large-scale investment business projects that require one-time significant financial investments. For example, such as the purchase of cars, special equipment, production equipment, commercial premises, large lots of goods, etc.

Fast loans to small business

Fast loans to small business

What should a small business manager do if they need money very urgently to close the temporary cash gap? And at the same time at the bank would you agree to bypass the established procedure to go to him for a meeting?

For such emergencies, an entrepreneur should apply for a loan from one or more microfinance institutions (MFIs). Thus, the loan amounts for small business MFIs are quite limited, only about 20 thousand, maximum, 30 thousand dollar. This is usually not enough to support business processes, eliminate cash gaps, even within the framework of individual entrepreneurship, not to mention a viable PP. But if you apply to several MFIs at the same time, you can end up with a solid amount sufficient to solve the already serious operational business challenges.

MFI’s main advantages over banks:

  • exclusively machine (software) processing of information declared by the applicant remotely, via the Internet, from any location (without obligation to visit the MFO office)
  • the simplest and most accessible procedure for applying for a small business loan, which involves only the process of identifying an applicant without the process of verifying his solvency (at least in explicit form). As a result, MFI micro-loans become available to even the youngest business start-ups, with poor financial condition and volatile operating activities, which would necessarily be denied credit in classic banks.
  • very high speed of consideration of the loan application and small business loan, which is based on two previous factors.

Critics will say that MFIs have too high interest rates on loans? This is true. But no one is calling for small business MFIs to lend to long-term investment projects. It is optimal to do a maximum of several days or weeks, to eliminate cash gaps, purchase of urgently needed materials, without which the production activity of the enterprise will cease, in other urgent cases, when the cash flow movement is important not less than their current volume.

And the speed, which is the speed of deciding on a loan application and the speed of granting (crediting) a loan to small businesses, in most MFIs is simply impressive. A common “standard” for many MFIs is to consider a loan application and credit card money within half an hour. Such high efficiency in granting loans to small business and causes the high popularity of MFIs among its representatives who willingly use the services of MFIs to solve urgent and urgent business problems.

Cash loan

The standard of living is very different depending on the city. People who live in and other regional centers can earn much more than people from other cities. In this case, prices in the grocery stores are often the same, and clothing and different entertainment, not the fact that it is higher in the capital. More offers, higher competition, and therefore conditional bowling can become cheaper.

Therefore, to get a loan is periodically required for every resident of the city. Banks provide this opportunity, but after the crisis, their conditions have changed. It is necessary to have an official job, to earn good money, in credit history there should be no delinquency. But to issue a cash loan without a certificate of income is not easy. Speaking of banks, of course.

In recent years, microfinance organizations have become widespread in the city. Now if you need a cash loan, you can apply to the micro finance organization.

Advantages of micro finance organizations

Advantages of micro finance organizations

It is important to know that many micro finance organizations work online, so if you need a loan, our lending company is your hometown. The main thing is that you have Internet access from any device.

Microfinance organizations offer the following benefits:

  1.  grant credit without income statement ;
  2.  do not require a large list of other documents, only a passport and TIN;
  3.  make the decision as quickly as possible;
  4.  transfer money to the card that can be used as cash;
  5.  create convenient conditions for timely repayment.

Receiving loans in micro finance organizations, it is worth paying attention to the interest rate.

Receiving loans in micro finance organizations, it is worth paying attention to the interest rate.

It is slightly higher than in banks, which pays off the speed of decision making and the likelihood of a positive result. But in order for the loan amount not to grow, it is important to make payments on the loan on time. Then your financial situation will only improve!