How Does Loan Portability Work?
Did you borrow money and now you are suffering to pay interest? What if you could just start paying lower interest for this debt? Just do a loan portability.
Loan portability can help you pay off debt with lower interest rates.
This is a procedure to which everyone is entitled, but not everyone knows it. Read the text below to learn how to reduce interest on personal loan and credit card debts , and so ease your installments.
What is loan portability?
The portability of credit or loan is a procedure authorized by the Federal Government . The objective is to increase competition between banks and to enable them to reduce their interest rates.
Through loan portability, you can change the lending bank from your debt by migrating to an institution that charges lower interest.
Thus, the transfer of debt from one institution to another occurs. The value of the debt does not change, nor the deadlines for the payment of the installments. You still owe the same thing, but now with smaller interest.
This means a reduction in the value of the plots. This way you will save a little money each month.
The way in which loan portability occurs is simple. The new bank pays the remaining balance of its debt to the current creditor bank, liquidating the debt with it.
In this way, the new bank “buys” its debt, and becomes its lender.
How to request a loan portability?
Any individual or legal entity may require loan portability or credit relating to a debt, regardless of its value.
It is enough that the person has used a credit device and taken out a loan from one of the financial institutions included in the National Financial System (SFN).
Every financial institution of the SFN is obliged to offer the portability of credit to the clients, in case they wish to migrate to another bank. However, no bank or institution is obliged to accept portability, that is, to assume its debt.
So the first thing to do to get loan portability is to find a bank that is interested in buying your debt, by taking away the remaining amount from the bank that is your current lender.
You must notify the lender bank that you wish to transfer your debt. The bank will have a one-business-day deadline to provide all the information necessary for the execution of debt portability.
You should then take this information to the new bank to which you want to transfer the debt.
The new bank will buy the current bank’s debt. In this way, he will take over the debt for you by charging you the interest rates that have been negotiated between the parties.
Some banks make room for the negotiation of these fees. The goal is to get rates lower than what you paid earlier.
To get the lowest possible interest rates , compare the offers from various banks to the portability of your loan.
The information that your current bank should provide you with to get you the portability of the loan are:
- Current debt balance;
- Contact number;
- Annual rate of interest (nominal and effective);
- Total debt term;
- Remaining time;
- Value of services (principal amount and value of charges);
- Number of installments remaining;
- Demonstration of the evolution of the value of debt over time.
Loan Portability Costs
The procedure of credit portability itself has no cost.
The bank that takes over the debt makes the payment with the old creditor through a bank transfer. The costs of this transfer are exclusively borne by the bank and can not be passed on to the client.
However, if you are not yet a client of the bank to which you want to transfer your debt, it is possible that the bank will require payment of a fee to begin the relationship start-up registration.
Loan portability has advantages for both the client and the bank that takes on the debt.
For the bank that is taking over the debt, the advantage, of course, is to receive from you the interest on the monthly installments. It’s as if you had borrowed this bank from the start.
For the client, the main advantage is the reduction of the interest rate, which implies a smaller value of the monthly installments of the debt.
In some cases, your current bank may make a counter-offer, offering a lower interest rate than the new bank. It will be up to you to decide whether or not to accept the proposal.