Transferring a loan to another bank is it possible?

It would seem that by signing a loan agreement with the bank we are inextricably linked to it until the end. This is not quite a comfortable situation. After all, many factors can change during loan repayment and stop us being satisfied with our bank’s services. For example, we often change our mobile operator, but the idea of ​​changing the bank does not even occur to us. Is it possible to transfer a loan to another bank at all? If so, how do you do it and is it profitable?

Can I transfer the loan to another bank?

Can I transfer the loan to another bank?

Credit transfer is unfortunately not as easy as transferring a mobile number. However, it is possible and this solution is becoming more and more popular. Transferring a loan to another bank can be done by:

  • refinancing loan
  • consolidation loan.

The first solution is dedicated primarily to those who want to transfer to another bank one particular loan, and other debts do not have or do not want to modify them in any way. On the other hand, the consolidation loan is recommended above all to people who pay many different debts at the same time and would like to reduce their installments.

What is loan refinancing?

What is loan refinancing?

In practice, refinancing a loan is just transferring the loan to another bank. It works on a very simple principle – in a selected bank we take out a refinancing loan and cover the debt that we wanted to transfer. In this way, we end our relationship with the previous bank and it can no longer claim any claims against us. It doesn’t matter where we got the loan repayments from, it is important that we have them so that we can settle uncomfortable loans.

The refinancing of the loan is primarily made by people who want to change their mortgage into a more financially attractive. It should be remembered that the cost of mortgage loans has been consistently falling for many years. This is good news for those who are planning such a loan. However, people who took out a loan for housing earlier look at it differently and over time it has become unattractive for them. During the refinancing of the loan, our property will be re-valued. It can be positive for us if we’ve been able to increase its value since we took out a mortgage.

Is the refinancing loan profitable?

Is the refinancing loan profitable?

When we transfer a loan to another bank, we change not only the creditor. The total cost of the commitment will also change. The difference may be due to a different interest rate on the new loan, the amount of commission, as well as the time over which we decided to spread the refinancing loan. There is nothing to prevent such a loan from being extended in time if we want the least monthly installment. In the case of mortgage loans, the bank’s margin, i.e. part of the interest rate, is particularly important. In addition to the margin, interest also consists of a variable interest rate, but banks have no influence on it and we will not gain anything in this field. However, the amount of the margin is completely in the bank and even lowering it thanks to a refinancing loan of 0.5% or 1% can make a huge difference in the total cost of the loan. While the rate is constantly falling, it can be very different with average margins.

Therefore, it is worth paying attention to this when comparing refinancing loan offers. There is one important factor that significantly affects the profitability of refinancing a loan. We are talking about a commission for early repayment, which can be found in many loan agreements. Even if it is relatively small, with a high loan amount (which is the standard for mortgage loans) it can become problematic and offset the profit that refinancing would give us.