Transferring a loan to another bank is an option that in many cases turns out to be a really highly attractive solution. Obviously, mortgages are most often transferred. Here, there may be a whole range of circumstances prompting the customer to transfer credit.
It happens, for example, that we received a mortgage from a bank a few years ago on terms that were understated due to our creditworthiness at the time. Since then, however, we started earning more, we received a decrease and in addition, a lot of new offers appeared on the market. In such a situation, the transfer of a mortgage to another often turns out to be savings of up to several hundred dollars per month.
At the same time, it is worth realizing that not only mortgage loans, but also cash loans and in some cases even loans may be subject to consolidation or actually consolidation. However, especially in the case of the latter, the mechanism of possible consolidation in the bank may prove to be really complicated and demanding.
So what is the most important thing to know about transferring a loan to another bank? When and in what situations can loan also be consolidated outside, and what is the process like? Let’s take a closer look at this issue and try to give the most comprehensive answers to the above questions.
Transferring a mortgage to another bank: the most important information
As already mentioned, mortgages are by far the most frequently transferred to other banks. This is due to several different factors. First of all, in the case of a mortgage, swapping the offer for a more favorable one can mean really serious savings on a monthly basis, and even more so on an annual basis.
Most often, these amounts are completely incomparable to what we can save by moving, for example, a cash loan to another bank. Another issue is the fact that banks are more eager to decide to “take over” mortgages that customers have taken from competitors. For a bank, a mortgage is a profitable and, in addition, a relatively safe investment. After all, mortgage loans have collateral in the form of real estate, which for the bank is an important factor in favor of the borrower’s solvency.
Transfer of cash loans
Transferring a cash loan is a much less practiced option than for mortgages. This is mainly due to the fact that banks are rather reluctant to provide this type of service. What’s more, while the possibility of transferring a mortgage is an option that is available as standard in the offer of most banks operating on the market, the consolidation of cash loans will only be possible in some banks.
Most often, such a solution is chosen by clients who have several different cash loans in a given bank on relatively unfavorable financial conditions. In what specific situations can the consolidation of cash loans from another bank be an option for the borrower?
First of all, it is worth remembering that the consolidation loan will generally have a significantly longer repayment period. Another issue is the fact that banks’ offers differ significantly in terms of the maximum repayment period of cash loans. Thus, it may happen that the customer has, for example, 4 cash loans in a given bank with a repayment period of 60 months. At the same time, the offer of a consolidation loan in another bank is available for a period of 120 months. In such a situation, consolidation, ie transferring the liability to another lender, may result in a significant reduction of the monthly installment.
At the same time, it should be borne in mind that a consolidation loan will always be a new loan. This fact has certain consequences for the client. First of all, a commission for granting it will almost always be added to the amount of the consolidation loan.
Another issue is credit assessment. When considering our application for the consolidation of cash loans, the bank will take into account not only the installment of the new loan but also the monthly burden resulting from the loans currently being repaid. In practice, this means that if, for example, the current sum of monthly installments is USD 500 per month and the consolidation loan installment is at the level of USD 300 per month, the bank will calculate our creditworthiness for USD 800 per month. Needless to say, for many customers, this will mean having too little creditworthiness.
The bank will almost certainly not grant us a loan if the monthly charge is around 50% of our monthly income. In addition to our revenues, of course, our monthly expenses are also taken into account. Only on this basis and in connection with the verification in the debtors’ bases will our creditworthiness be finally calculated.
Consolidation of loans outside the bank
An even more complicated solution is the possible consolidation of loans outside the bank. First of all, only a few banks offer this type of opportunity. An important problem may also be how the bank “sees” short-term loans in the BIK database.
The payday loan with a 30-day repayment period with a high probability will be visible to the bank as a monthly charge. So if we have 4 payday loans for a total amount of USD 5,000, the bank can calculate that our monthly charge on loans is just USD 5,000. In practice, this can mean that consolidation of loans outside of Jules Maigretych will only be possible for customers with a really high monthly income.
The situation will be easier in the case of installment loans because in this case the current monthly burden of repayment will be taken into account, ie simply the amount of the installment or installments per month.
There is another major obstacle to the consolidation of loans at the bank. Well, for such consolidation to be even theoretically available, the given liability must be visible to the bank in the Credit Information Bureau database.
Consolidation of loans outside and debt relief loan
In addition to the banks’ offer on the market, you can often also find “loan consolidation” offers from loan institutions. However, you should be aware that in this case, we are dealing only with a marketing ploy. Under the provisions of law, loan companies cannot grant consolidation loans.
So the only option actually available will be so-called debt relief loans. In this case, the loan company provides financing to pay off existing obligations. Most often a debt loan will come with very high costs. With a high degree of certainty, the lender will also request additional security for such a loan, for example by establishing a pledge of real estate or by joining another person’s loan, ie the guarantor.