The battle for interest: how to lower the rate on an open loan

Photo: Valery Sharifulin / TASS

What is refinancing

The new refinancing loan can cover any type of loan - consumer loan, car loan, cash loan, card loan or mortgage. You can refinance one or several by combining the payment schedule and lowering interest rates.

Mortgage refinancing is one of the most demanded programs. “Now, for the most part, clients who took out mortgages in the first half of 2015 are refinancing,” says Alexei Tartyshev, head of marketing at DeltaCredit mortgage bank. Then the average rate on this type of loan was kept at the level of 14% per annum. In July 2017, it dropped to 10.94%. Against this background, mortgage holders began to turn to banks to soften the debt burden. “After the rate cut in August, a sharp increase in demand for the product was recorded,” confirms Nikolai Vasev, director of the DomClick division of Sberbank.

Refinancing of cash loans is also in great demand - this service was in the lead in the VTB Group in the first half of this year. “The loans of the last and the year before last are mainly refinanced,” says Yulia Demenyuk, Deputy Head of VTB Retail Products Department.

How to apply for loan refinancing

You can apply for refinancing both in your own bank and in a third-party bank. To do this, you need to prepare a standard package of documents: a passport, a certificate of income 2-NDFL, a loan agreement or notification of the full cost of a loan, SNILS - and write an application. At the same time, the borrower must be over 21-23 years old, depending on the bank, work for at least three to six months at the current place of work, and have an income of 10-25 thousand rubles. per month, depending on the region of service of the loan, and also be a bona fide borrower, that is, timely repay existing loans over the past 12 months.

Banks impose requirements not only on the borrower, but also on the loans that he is going to refinance. In particular, the loan must be opened and serviced for at least three to six months before applying for refinancing. At the time of refinancing, at least three months must remain until the end of the loan. Experts say that the closer the maturity date, the less profitable refinancing becomes for the client, but such credit movements are not unprofitable.

As for the level of the rate, some of the market participants determine it depending on the planned term of servicing the refinanced loan. The new loan period is 12 to 60 months. In rare cases, the maximum term reaches 84 months, but the rate for it will be higher. The conditional rule “the longer the maturity, the higher the rate” applies to Sberbank, Rosselkhozbank and Gazprombank. Other banks set the rate based on the loan amount: “the smaller the volume, the higher the rate”. According to this logic, they work in all banks of the VTB Group, Rosbank and UniCredit Bank.

Photo: Alexander Koryakov / Kommersant

Special Requirements

Banks describe the refinancing service as massive and available to any client. However, for some categories of the population, refinancing is less affordable. For example, it will be difficult to find a bank and favorable conditions for refinancing for people who have reached retirement age. The maximum age at which such a loan is provided is set in most banks at 65 years. The refinancing program for clients over this age at Post Bank is almost the only one in the entire market.

Banks may have other unusual requirements for the borrower. For example, Raiffeisen Bank refuses refinancing to individual entrepreneurs, lawyers who have established their own office, and business owners. The bank explains this by minimizing risks. VTB also has limitations in relation to this category of borrowers, but one year of successful business is enough to qualify for the refinancing program. “This figure is enough to consider a self-employed client trustworthy. Such calculations are used throughout the entire market, ”experts from VTB clarify.

Banks are most loyal to their payroll clients. Firstly, for them, the number of necessary documents that must be provided is reduced - this is a passport, a loan agreement and SNILS. Moreover, the rate for them is set on average 2-3% less.

Employees of budgetary organizations from the spheres of health care, education, public administration and law enforcement agencies can count on some preferences. Banks set a minimum rate for such clients. But the maximum is received by those borrowers who do not have or refuse to purchase either personal insurance or insurance for property acting as collateral.

What are the benefits

The main benefit for the borrower is a decrease in the monthly payment. “The new loan is issued on more favorable terms than the previous ones, and the monthly payment turns out to be lower,” says Nikolai Volosevich, head of the department for the development of credit cards and cash loans at Alfa-Bank.

“The benefit from refinancing depends on the term that the client has already serviced the loan, on the loan amount and on the rate - past and future,” explains Alexey Tartyshev. In a mortgage, if a loan has been taken recently, in the current conditions "there is the greatest rational benefit when the rate is reduced by about 3-4%," he explains.

For example, if the borrower took out a mortgage loan for 5 million rubles. for a period of ten years at 14% per annum, then its payments for the entire period will amount to about 9.3 million rubles. If he manages to refinance the loan at a rate of 11% per annum, the total payments for ten years will amount to slightly less than 8.3 million rubles.

“On average, the difference between the old and new rates on cash loans is about 5 percentage points. However, the “discount” can be 10-15 percentage points when it comes to refinancing unsecured loans issued in 2015, ”notes Yulia Demenyuk, Deputy Head of VTB Retail Products Department.

Financial advisers also consider it an advantage to be able to consolidate loans served by the borrower. “The danger of having several loans is that it becomes difficult for the borrower to control the level of his expenses and he may forget about the need to service the loan or he will not have enough money on the right day,” warns Associate Professor of the Financial University, independent financial advisor Saida Suleimanova. “Consolidation of loans allows you to clearly track your capabilities and loan obligations,” adds financial consultant Natalya Smirnova. Daniel Zelensky notes that many borrowers have already begun to understand that in the current economic situation it is irrational to serve several loans at the same time in different banks.

Photo: Vladimir Smirnov / TASS

Underwater rocks

Some experts believe that it is easier to get a refinancing loan from a third-party bank. “The interest on the loan is the bank's profit. If the bank lowers the interest rate for the borrower, it will simply reduce its own profit. And the bank, as a commercial organization, does not want to reduce its own profits, ”explains Dmitry Ovsyannikov, director of the mortgage broker Ipotek.ru.

Zelenskiy notes that it is often easier to get refinancing from another bank, since banks use this service as a cross-selling tool and attract new customers with a positive credit history, for which they are ready to soften conditions or make a profitable offer.

The VTB Bank Group does not refinance loans issued by the banks of its financial group, but offers alternatives. “We offer our clients banking procedures similar to refinancing, in particular, a pre-approved loan for a large amount to repay the previous loan and at a lower rate,” explains Yulia Demenyuk. Sberbank found another solution, combining the ability to refinance its own customers and at the same time lure them away from competitors: the bank refinances up to five loans at once, but at least one of them must be taken from another bank.

You also need to keep in mind that those who want to refinance on more favorable terms will face a kind of credit trap. The transfer of funds from the new bank to the old one does not automatically repay the debt without the participation of the borrower, warns Nikolai Volosevich. “The new bank transfers funds to the old one, but this does not mean automatic closure of the previous loan: the funds will remain in the account until the client issues an application for early repayment,” the expert says. As a result, it may turn out that for some time the borrower will have to pay both on the old refinanced and on the new refinancing loans.

Financial advisors recommend preparing for this in advance and stocking up on the paperwork necessary to pay off the old loan, thereby cutting costs. “Banks, on the one hand, offer customers to take a certain amount in excess of the required amount, allegedly to reduce the financial burden for this time. But this is another of those tricks that will really help one client, and relax the other, and the latter will spend more time and money on paying off the old loan, ”warns Saida Suleimanova.

Some banks for the period of re-registration set a higher rate for a new client, which will remain in effect until he ends the relationship with the previous bank. Such a scheme, for example, is provided in the bank "DeltaCredit".

“The situation, however, may be the opposite: initially, a low rate is given, which can be sharply increased if the client has not repaid his previous loans - usually 40-50 days are given for this,” says Volosevich. In Raiffeisen Bank, this period has been increased to 90 days, and after it expires, the rate will increase by 3 pp if the client does not fulfill his obligations.