The option to consolidate loans via best consolidated credit companies is usually used to regroup various loans or to lengthen the repayment term, but it can also be used to improve financing conditions, that is, to obtain a lower interest rate. Then we will see how much we can save thanks to the refinancing, how much money it can cost us and with what entities we can get cheaper.
How much money can I save if I refinance a consumer credit?
Requesting a personal loan (either to our bank or another entity) to improve the conditions of one that we have in force is not the most usual, but it is one of the few options that we have if we want to pay less money for a loan if we consider that this one is too expensive . However, it is important to be clear that no entity will offer to refinance a consumer credit if we do not have a perfect solvency profile.
One of the banks that offer personal loans to cancel others is ING. Your Orange Loan has one of the lowest market interests, only 5.95% TIN (from 6.11% APR), so if we use it to improve the conditions of another personal loan, we will save a lot of money in interest.
Let’s say, for example, that we have a current loan at 8% APR and we have to pay € 6,000 in 5 years. In this case, we should reimburse, in addition to the outstanding capital, € 1,299.44 in interest. However, if we cancel it with the Orange Loan and keep the amount and the repayment term, we will have to pay € 978.25, which will mean a saving of € 321.19.
How much does it cost to refinance personal loans?
As we can see, refinancing our personal loans can help us save, but doing so has a cost. In general, these are the expenses that we will have to face when we refinance a personal loan:
- Compensation for early cancellation: it is the commission that we will have to pay to the entity with which we have a valid credit when we refinance it, although not all banks charge it. As a maximum, this compensation can be up to 1% of the canceled capital (0.5% if there is one year or less until the repayment period expires).
- Commissions for the opening and study of the new credit: as in the previous case, the collection of these commissions will depend on the conditions offered by the entity that offers us a loan to refinance another.
- Liability expenses: in many cases, in order to obtain personal loans at a good price, we will have to contract a series of linked products. The cost of these products will not always be reflected in the APR, so we will have to read their conditions to know what their price is. In general, we will have to settle the payroll and hire insurance.
- Notary fees: if we sign the contract of the new loan before a notary, the entity will add the fees of the public official to the price of the product.
Another aspect that may increase refinancing is the extension of the repayment period. If we decide to return the new credit in a longer term, the amount of the monthly payments will be reduced, but in the long run, we will pay more money in interest. Therefore, if we want to save, it is advisable to maintain or even shorten the return period.