Refinancing credit

Refinancing credit is nothing more than exchanging an old financial obligation toward one bank for a new obligation towards another bank or object of finance.

In practice it means that you pay the old, expensive credit with the new, cheap credit. In the British market practically every bank offers the possibility to grant such refinancing credit. But however often this happens, the process of exchanging credit is profitable for the bank and not for us, or to put it another way, we still have to pay for the entire operation.

Making a decision about refinancing credit or creditors involves taking into consideration a number of unusually important elements such as:

- The currency of the current credit.
- The interest rate of the current credit as well as the duration.
- General acquaintance with the finance market (after all, we don’t want to rely only on the opinions of the “sellers” of the various types of financial products).
- The entire size of the credit including all “secondary” costs and others.

There is one basic issue which we always explain to our students, namely that the main criterion for a decision should be not only the credit history but also healthy reasoning. Many banks offer us assessment on which to base refinancing credit, the size of the credit instalments reduced by half. Is this possible? Is it necessary to have a PhD in economics in order to see that this is just a marketing ploy?

We must be aware that, with the majority of cases above, the rate is in fact reduced by half, but the duration of repayment of credit is increased three times.

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