Loan refinancing: compare the payment and the full cost

Refinancing uses a new loan to repay one or more existing obligations. It can simplify repayments or reduce financing costs, but extending the term can increase the total expense. Start by comparing what you would still pay under the current agreements with the full cost of replacing them.

Which figures should you request?

Ask the existing creditor for the outstanding balance and a settlement figure calculated for a specific date. Request an individual replacement offer showing its term, schedule, BVKKMN, total repayment and all required fees. Comparing nominal interest alone can miss contract, administration and other charges.

Why can a smaller payment cost more?

In a simplified illustration, 12 remaining payments of €100 total €1,200. A replacement with 24 payments of €60 totals €1,440 before any additional charges. The monthly payment falls by €40, but future payments rise by €240. This is an educational example, not an available product or an individual recommendation.

• Compare future costs from the same date.
• Include settlement and new-agreement charges.
• Check whether payments can change and services are optional.
• Consider reduced income and payment difficulties.

Refinancing still requires assessment

The new provider assesses documented income, existing commitments, payment history and its own requirements. Refinancing does not guarantee extra borrowing or provide a way around overdue debts. If payments are already difficult, contact the current creditor first and discuss available solutions. Another debt should not simply conceal the immediate problem.

Prepare one complete comparison

List each creditor, balance, instalment, remaining term and due date. Identify which debts the replacement would actually settle. Any additional cash is new borrowing and should be assessed separately from possible savings.

Confirm who will pay the old creditors and when you will receive closure confirmations. Do not stop ordinary payments without an agreed basis. Keep the offer, new schedule and settlement documents. If the benefit comes only from a longer term, describe it as a lower monthly burden rather than automatic savings.

Read the BVKKMN explanation and comparison checklist. Official background is available from the Bank of Lithuania.