Is it profitable to refinance payday loans?
Payday loans, like payday loans – most private loan companies using this type of products know well the repayment period of such a loan. Usually, it is 30 days, in rare cases, it can be 45 or 60 days. In the event of problems with timely repayment, loan companies offered their customers an appropriate extension fee to extend the repayment period.
Borrowers, despite the additional cost, willingly used such a solution, because it was still cheaper than no repayment within the period specified in the contract. That was until last year. Unfortunately, the regulations in our country have changed somewhat and it is now more and more difficult to extend the repayment period.
Why did companies opt-out of this service?
After all, she was also able to attract customers in some way? They did not give up on their own will. Well, the new law, which came into force and aims to protect citizens against excessive debt, significantly limits the cost limits for loan companies. Giving up this cost was the simplest.
On the one hand, it deprived people who have problems with timely repayment of the obligation to extend the repayment period, but on the other hand it protects them against the accumulation of additional costs. Because there were cases in which customers used this method several or even a dozen times.
At that time, they practically paid only for the extension of the repayment period and the main obligation remained unpaid.
Refinancing of payday loans
The introduction of cost limits for non-bank loans can prove to be a big problem for many clients of loan companies. Therefore, companies have been forced to find other solutions, such as refinancing a loan. Everything, therefore, to limit the cost limits so that they approach the value of this statutory limit.
Following this trail, private lenders were somewhat forced to significantly reduce the costs of payday loans provided on evidence. The limits included not only payday loans but also installment loans. The upside is that the costs of loans are definitely lower, provided, of course, that the commitment is repaid on time.
Those companies that left the option to extend the repayment of the loan also had to introduce some restrictions and can no longer extend the repayment for a fee. They usually allow a repayment shift once, two at most three times.
Extension of the repayment period
As the Anti-usury Act came into force, many private loan companies gave up extending the repayment period at all, precisely so that they do not generate additional costs and fall within the limits set out in the Act. For example, Wonga or Soho Credit are such companies. And what if, however, we have problems with repayment?
There is nothing else but to contact the customer service department of the loan company as soon as possible to look for a solution that will satisfy both parties. Usually, companies split the liability into more convenient installments. If this solution were not an option, refinancing the loan still remains.
This is a simple solution, but it does not change the fact that the borrower will bear the largest costs.
How is this done?
The company where we made the commitment transfers us to another loan company that repays us for the debt. We are signing a new contract with the other company and we still have debt to pay and additional costs.
Previously, we paid extra for extending the repayment period and now for refinancing. Either way, the repayment problem remains. And it also happens that the company where we originally took out the loan and the company to which we were sent operate under one and the same brand. Then the extra money from refinancing the loan goes to one lender’s bag anyway.
Such refinancing allows the cost limits for loans included in the Act to be maintained. How? The original company does not generate additional costs, because the loan is repaid by another company, we sign a contract with a new company for a new financial product and in this way we extend the repayment period a bit. It’s a way around the rules.
Companies that refinance loans
Where can we find companies that refinance loans? Among other things, we can start the search with Vivus, Ekstra Portfel or Via SMS. At Ferratum, on the other hand, we will be able to extend the repayment period twice, each time by 30 days, of course for an additional fee or with a guarantee in the person of a giraffe.
To use the surety, if there are problems with repayment, we should provide the loan company with a guarantee signed by a girrant, two witnesses or a notary public within five days of the repayment deadline.