Is it worthwhile to make a Loan through Refinancing?
The types of loans most used by people in recent years are still credit cards, overdrafts and personal loans. However, more and more, the people has been looking for another modality: refinancing.
Also called a secured loan, refinancing is a type of loan in which an asset is placed as a guarantee for payment of the contracted debt.
Due to this guarantee, the loan terms are more attractive. Examples of this type of loan are the vehicle secured loan contract and the property secured loan contract. Are you interested? Continue reading and understand more about it!
What are the main benefits of refinancing?
Basically, the main benefits of those looking for this type of loan are:
- lower interest;
- longer terms;
- possibility to raise more money;
- some types of refinancing are not very bureaucratic;
- flexibility in the use of money;
- possibility of early settlement with interest discounts.
Why does this type of loan offer such benefits?
As an asset is being placed as a guarantee of payment, the risk to the financial institution providing the credit is very low. In this way, the interest charged on a monthly basis will be much lower and the terms for repaying the debt may be longer than in other loans.
In addition, the loan amount will be realized according to a percentage of the asset placed in guarantee. Thus, especially for loans with guaranteed property, the contracted value can be high, reaching about 60% of the property value.
Regarding the flexibility of the use of money, it occurs because it is not necessary to present a destination for the use of credit. This means that it is possible for the borrower to use the resource for all types of situations. However, be careful: it is necessary to have planning when using this resource, as an asset is being placed as a guarantee that the loan will be fully paid.
With all these benefits, refinancing is a good alternative for those who want to:
- get rid of debt whose interest is higher;
- opening a business of their own;
- to fulfill a personal wish, such as marriage, travel abroad, home renovation, etc.