When you borrow 100,000 crowns, somewhere you pay a monthly installment of 1500 CZK, somewhere else twice as much. However, it is easy to get rid of high repayments by consolidating loans or refinancing loans. Why is consolidation beneficial to the borrower and how does it differ from refinancing?
By consolidating (or merging) loans and refinancing the loan, you can achieve more favorable credit terms by leaving the expensive lender for cheaper . In addition, for consolidation you will be given the option to change the due date. But the biggest relief will be when you see a lower monthly payment on the invoice.
The main difference between refinancing and consolidation is the number of less favorable loans that the borrower changes for a new loan with better conditions . For loan refinancing, only 1 old loan is disposed of, while on loan consolidation it changes 2 or more loans for just 1 new loan.
|Benefits Refinancing vs. Consolidation|
|Loan Refinancing||Loan consolidation|
In both cases, the result should be a lower monthly payment, and often a different interest rate. With consolidation, you get more savings thanks to lower credit management fees. You do not pay a few different credit companies, but only one, so you logically have a lower credit management fee.
How does loan refinancing work?
Mr. and Mrs. Puštík took a loan of 80,000 at a non-bank lender Prominent Cash sro They should repay CZK 6,857 per month, so they will pay a total of CZK 150,843 for borrowing money in 22 months.
But after 1 month of repayment, Mr. Pashik compared the interest offered with other companies and found that the loan from Provident was relatively expensive. In particular, due to the cash withdrawal option chosen, the annual percentage rate of charge (APR) climbed to 53.40% per annum. Mr. Pashik noticed that MedBank offers the RPSN almost 4 times smaller in refinancing, 10.37% in early repayment, or 13.69% in other cases. He decided to refinance. How many spouses have spared them?
|How Much Will Savings Thanks to Refinancing a Loan?|
|Loan before refinancing||Loan after refinancing|
|loan for 80 thousand at Prominent Cash||refinanced loan from MedBank to 94,458 CZK|
|monthly installment amount: CZK 6,857||monthly installment amount: CZK 5,905|
|installments: 22 (at the beginning)||installments: 16|
|APR: (includes repayment cash payments) 53.40% pa||APR: 13.69% pa|
|Total to pay (at the beginning): 150 843 CZK||savings due to refinancing : CZK 49,517|
|Remittance after 1 month repayment: 143 997 CZK||Total payable: 94 458 CZK|
Calculators were used on the Prominent Cash and MedBank web site with the latest data from September 24, 2015. Prominent Cash’s loan includes the possibility of cash collection of installments. With MedBank we do not count on the bonus for early repayment, so the refinancing savings can be even higher.
What is loan consolidation and how does it work?
When the couple married a loan from Provident, they met in front of the counter with their neighbors, Duiker. Mr. and Mrs. Lomus were then taking the same loan of 80,000 as the Puntian, so Mr. Pashik advised Mr. Lomus to try refinancing.
How much will your loan repayments fall after consolidation? Consolidation Calculator
However, Mr and Mrs Lomus had a second loan (for another 100,000 at Fanloan) and a credit card loan (30,000 from a credit card from Commercial bank). Therefore, it was more reasonable for them to consolidate their loans, ie to merge them into a single loan.
Lomus also managed to consolidate their debt after 1 month. See how much they’ve saved.
|How much will it save for Peros through loan consolidation?|
|Loans before consolidation||Consolidated loan after consolidation|
|3 separate loans from 3 different companies||consolidated 3 loans for 217,318 CZK at MedBank|
|1) 80 thousand loan from Provident (see above)||By merging 3 loans, they become only 1 loan with the following parameters:|
|Total loan amount (at the beginning): 150 843 CZK|
|Repayment after 1 month of repayment 143 997 CZK|
|2) credit from Commercial bank credit card to 30 thousand|
|monthly installments CZK 1,513|
|Total credit from the credit card to burn: 37 728 CZK|
|3) loan for 100 thousand at Fanloan|
|monthly installment: CZK 1,899|
|APR: 11.5% pa||Consolidation: 66,021 CZK|
|Total loan amount (at the beginning): CZK 136,728||installments: 27|
|For payment after 1 month repayment 134 829 CZK||APR: 13.69% pa|
|Total monthly payments (for 3 loans): 10,269 CZK||Total monthly payment: 9 279 CZK|
|Total payment for all 3 loans: 316 554 CZK||Total amount to be paid: CZK 250,512|
Calculators were used for calculations on Prominent Cash, Commercial bank, Fanloan and MedBank with the latest data from September 24, 2015. Prominent Cash’s loan includes the possibility of cash collection of installments. With MedBank we do not count on the bonus for early repayment, so the refinancing savings can be even higher.