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Refinancing of payday loans

Timely loan repayment is not always possible, and when the client has problems returning the money on time, he can refinance his loan. Refinancing payday loans is a relatively new service, and at the same time a very popular service. Refinancing a payday loan is otherwise obtaining funds to pay off a payday loan from another loan company. This is nothing else than the possibility of obtaining a second payday loan to pay off the first one. Refinancing a loan consists in transferring your debt from one company to another company, but in order to transfer such debt, you must pay an appropriate commission. Refinancing is useful in a situation where you have a problem paying off your debt on time. This situation can occur as a result of job loss, downgrading to a lower position with lower salary, or in the event of a loss of liquidity due to emergencies. In this case, the refinancing of payday loans is often the only way to obtain money to repay the debt.

How was the loan refinancing service created?

To understand what the loan refinancing service is and where the idea for creating such a service came from, you need to follow the recent changes on the loan market. Until the introduction of the anti-usury act, the main income of loan companies from payday loans via the Internet were fees related to extending loan repayment terms and sending reminders about unpaid liabilities. When limits on non-interest costs were introduced, companies had to change their policies and seek income from other sources. This is how the idea of ​​creating a refinancing loan was born. Such payday loans for those in debt are a new source of income for companies.

Reducing the non-interest loan costs to 25% of its value and setting the cost of the reminders sent to the equivalent of 6 times the NBP lombard rate per annum meant that loan companies had to find a way that would allow them to legally earn more money from their clients. This way is the refinancing of payday loans . This service is intended for people who have a problem with paying off their debts, but in practice it was created primarily to increase the income of loan companies.

Refinancing momentary in practice

The principle on which payday refinancing works is best described on an example. Let's assume that Kowalski borrowed $ 5,000 from company A. He is not able to pay off this loan, because his current financial situation does not allow it, and in this case, refinancing payday loans is a great solution. The loan company in which the payday loan was taken may offer Kowalski a refinancing loan in a friendly company B. Company A cooperates with company B and sends all customers who cannot pay off their debt to company B. Similarly, company B offers its insolvent clients to refinance a loan with a payday loan taken from company A. Despite competition, these companies help each other in obtaining greater income. Customers can take a loan from company B to pay off the debt in company A.

In this case, Kowalski does not receive money from Company B, either to the account or in cash. The money needed to pay off the debt in company A is transferred directly from the account of company B to the account of company A, bypassing the customer. However, in order for company B to finance the repayment of the loan in company A, Kowalski must pay a commission from company B on this service. The commission is often very high and can reach up to 40% of the cost of the entire loan.

Is the refinancing payday payoff?

Such payday loans for those in debt are, on the one hand, a great help in paying off previous liabilities, but on the other hand, they are also very expensive, so they additionally burden the borrower's budget. A refinancing loan can be both advantageous and disadvantageous. You have to be careful not to fall into the debt loop . In this case, the interest rate of the payday loan does not change, but in addition to the cost of the payday loan, the customer bears the cost of the refinancing commission.

The refinancing payday loan can therefore be a double-edged sword. On the one hand, it allows you to free yourself from one debt, but on the other hand, it generates another. Refinancing a loan is good if you know that in some time you will have enough money to cover the cost of the loan and the commission that must be paid to the company refinancing your payday loan. However, such a payday refinancing is not a good solution when your funds are very limited and you do not expect larger cash inflows in the near future.

The amount of the refinancing commission

The amount of the commission you have to pay for refinancing the payday loan is not predetermined. It all depends on the loan amount and the repayment date. The higher the loan amount, the higher the refinancing commission will also be. In practice, the cost of the commission may be identical to the cost of extending the loan, so the client does not really gain anything, while the loan company may "recover" the reduction in earnings caused by the entry into force of the anti-usury act. This is entirely legal and there are no refinancing restrictions or prohibitions as of now.
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Comments for refinancing payday loans

This way you can easily fall into a debt spiral ... so in my opinion you have to watch out for all these extensions
Daria August 27, 2019 1:15 PM
Sometimes these payday loans can only be taken for 2 weeks or a month. Not everyone will have enough time to raise money. Therefore, I believe that it is a great alternative to early repayment, which is definitely worth using.
Aneta Jun 15, 2019 5:17 PM
I have not come across such an option yet. At the earliest opportunity, I will ask for such a possibility
jozek 03-05-2019 15:51
It only makes sense that it is important not to fall into a debt spiral this way
Rafał 04/17/2019 11:48
If someone does not pay back a loan, in my opinion it is better to try to refinance it than to fall behind with its repayment. There is no joke with this type of loans, the amount to be repaid grows very quickly, so each day of delay increases our debt.
Ela 03/14/2019 12:02 PM
It is very good that the market of companies offering payday loans sometimes adapts to the realities and possibilities of the client. I believe more companies should introduce this option. Not all of us have funds on their account, even if they took out a loan. The more, the better such solutions.
Berta 03/08/2019 17:15
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