A fairly frequent question that arises to users is to know if it means the same to refinance and reunify debts. These are two financial concepts that can help us in an economic situation. And with which we can obtain better conditions in our loans.
So that you get out of doubts and these products do not confuse you again from Private Lenders we are going to explain what each of these concepts is and what differences there are between them. Would you like to know more about it? Well, don’t stop reading the next post. Go for it!
Differences between refinancing and reunifying debts
Although they may sound very similar and have certain similarities, refinancing and reuniting debts are two different financial products. Let’s see the difference below.
What it means to refinance debts
When we talk about refinancing debts we do it to refer to the option of looking for a much more profitable alternative to any of our loans. As the term with refinancing specifies, what we do is refinance a loan. There are two reasons that can lead us to use this financial product:
- That the loan conditions they offered you at the time were less attractive than those of current products.
- That you are in an economic situation that forces you to refinance a debt to avoid falling into default.
In any of the two cases, it will be necessary to negotiate new conditions with the lender that will allow you to obtain a more adequate credit for your needs.
To refinance a debt you can go
- To the lender with whom we have contracted the debt. In this case, what we will do is renegotiate the current contract so that the conditions are more favorable to us.
- To another financing company that offers us a much more interesting financial product.
Before opting for debt refinancing, remember that in both cases, you will most likely have to face associated expenses. Either by changing the conditions of the contract or by having to cancel it in advance to carry out with another company.
Go to debt reunification
The most frequent thing is to go to the reunification of debts when we find several loans at the same time whose terms we must pay each month. This is much more frequent than it seems. It is normal that presently we have the letter of the car, the mortgage of our house or some personal loan to face certain economic unforeseen events. Or to buy a product that we need for our home or our business.
In this situation, we may have serious problems to be able to pay each of the agreed installments. This, sooner or later, can end up leading us to overindebtedness and an inadvisable financial situation.
If we are caught by several loans whose interest and fees are drowning us, a good way to avoid it is to reunify debts. What does this mean? That we will proceed to acquire a new loan with which we cancel all the previous ones to have a single payment installment each month. With this type of financial product we will achieve: a much more comfortable share thanks to the lower number of interests.
However, debt reunification is not always advisable since it involves a series of expenses that must always be faced. For example:
- Fees for canceling previous loans
- Possible expenses for opening a new loan
- Return to pay all the expenses of a mortgage (agency, notary, simple note…)
To find out which is the most suitable option for us, it is best to have a good financial advisor.