25.03.2021.
Owing to a continuous and significant drop in interest rates, the demand for refinancing loans is on the increase. Through refinancing, debtors basically replace costlier loans with cheaper ones. At the same time, refinancing, i.e. early loan repayment, requires observance of the agreed procedure and takes certain time.
So far, a debtor who wanted to repay a loan early by taking out a refinancing loan from another bank had to take a number of actions. First, in accordance with contractual terms, the debtor had to file an application for early loan repayment several days ahead of the repayment and to request from the bank a statement of outstanding debt balance as at a specific date. With that statement, the debtor had to go to another bank and apply for a refinancing loan. Once a refinancing loan was approved, the loan proceeds in accordance with the statement of debt had to be transferred to the loan account with the bank whose loan was being refinanced. And yet, despite all these actions, it happened that a loan was not fully repaid, on account of the unreconciled changes in data on debt balance (as these data can change on a daily basis) or for some other reason. What also often happened in practice was that debtors failed to comply with the agreed procedure, i.e. failed to file an application for early repayment, to obtain a statement of debt balance, etc. due to which the loan was not closed and they found themselves in a situation where for some time they had to repay two loans concurrently.
Aiming to prevent such situations and spare loan users from administrative hassle, as well as to make the process of early repayment faster and more efficient, and ultimately to bolster competition among banks and intensify their efforts to win clients, the NBS adopted the Instruction on Loan Refinancing with Another Bank, to be applied as of 1 July 2021.
The Instruction will enable debtors to refinance all credit liabilities toward a bank (loans, credit cards, authorised overdrafts) in a simple and fast way, without going to the bank with which they want to close their liabilities and without any risk that those liabilities will remain unrepaid. Under the new Instruction, it will take only one visit to the bank from which a debtor wants to take out a refinancing loan to close all liabilities with the previous bank. All communication with the bank whose loan is refinanced is taken over by the refinancing bank. During the process, banks may not charge any fees or costs in connection with these liabilities. This enables all debtors wishing to reduce their current credit liabilities, i.e. reduce the price of their loans, to do so comfortably, because all activities in this context are to be taken by banks themselves. In addition, the Instruction provides for full transparency and sets out the structure of the calculation of the amount needed to repay the loan early and in full.
Banks are obligated to inform the clients intending to apply for loan refinancing about the advantages of loan refinancing in accordance with this NBS Instruction, as well as to disclose the relevant information on their websites. Also, the clients intending to refinance their credit liabilities by taking out a refinancing loan from another bank can request detailed information about the application of the Instruction from the potential refinancing bank.
Governor’s Office
