Loan refinancing

When is refinancing worth it?

When I review a refinancing offer, I put the remaining balance, the new fees and total repayment in one table. A lower payment does not win when the longer term raises the final amount.

Roman Dumitrescu, Head of Editorial

Refinancing means closing one or more existing loans with a new loan, usually at a lower rate or longer term, to reduce the monthly payment.

Consolidation combines several debts into one.

It's worth it if you get a lower APR than the average of your current loans, or if you want a single payment.

Compare the total cost, not just the monthly payment.

• ✓Combine several loans into one payment
• ✓Possibly a lower rate than your current loans
• ✓Amounts from 10,000 to 200,000 lei
• ✓Extended terms for a lower payment

When refinancing is worth it: GEO 50 art. 67 and the breakeven check

Refinancing a loan only makes economic sense if the new APR is low enough that the saving covers the extra costs.

The costs most consumers forget are four: the early-repayment fee on the old loan, the origination fee on the new one, property valuation (on mortgages), and the gap on insurance if the new bank requires different policies.

On variable-rate personal loans, GEO 50/2010 article 67 sets the early-repayment fee at zero — a detail that makes refinancing much more accessible.

On fixed-rate mortgages, the early-repayment fee is legally capped: max 1% of the repaid amount with more than 12 months left, 0.5% with less than 12 months.

The breakeven calculation is simple: divide total refinancing costs by monthly saving on the new payment.

If the result in months is below 12 and you still have more than 24 months to pay, refinancing is almost surely worth it.

If breakeven exceeds 36 months or you have less than 24 months left, the saving dilutes.

Consolidation is a particular form of refinancing: you combine several loans (cards, IFNs, consumer loans) into one, usually at a bank, with a single total payment lower than the sum of individual ones.

Upsides: one due date, lower average interest (cards and IFNs are expensive), simple management.

Classic downside: if the new term is much longer, total cost can rise even though the payment drops. Always check total cost, not just monthly payment.