Can I take out a personal loan to pay off another loan?

Need help with your credit portfolio? The credit intermediaries Poupança no Minuto present the best solutions according to your needs for free. Contact the intermediaries for help with your credits, or continue reading the article to understand how the amortization of one credit works with the hiring of another.

Can I amortize a loan by contracting another?

Yes, it is possible to take out a personal loan to pay off another consumer or personal loan.

However, it is necessary to note that, currently, the maximum term for a personal loan is 7 years. So, if you want to take out a personal loan to pay off another, try to ensure that you can repay the loan within that period.

For example, if you have a car loan with a financing term of more than 7 years, you may not be able to repay it in that period. And, if you have a very high effort rate, the bank may not even approve your personal credit.

Is there a cost to repay a credit early?

To pay off a credit early, there is a commission fee to be paid. Depending on the type of contract, the commission can range from 0.25% to 2%.

So, you may have to pay the following for early repayment commission: 

• 0.5% of the amortized capital, in contracts with variable rates, if there is more than one year left to end the contract term.
• 0.25% of the refunded amount, in variable rate loans, in the last year of the contract;  
• 2% of the capital reimbursed in fixed rate contracts.

And remember that, when contracting new credit to pay off another, there will be costs with process expenses, commissions, and required insurance.

And a personal loan for the housing loan down payment?

However, if the personal credit contracting is intended for the payment of the initial housing credit, by law you cannot do it.

Legally, you cannot take out a personal loan to use as own funds to finance the missing amount of the mortgage loan.

This is because limits have been imposed on the loan-to-value (LTV), the amount banks can lend in home loans, in order to protect themselves from the risk of default by customers. Currently, banks can only finance up to 90% of the property value (the lower of acquisition and appraisal) for primary dwellings, and up to 80% for secondary homes.  

In other words, as this law does not allow for borrowing 100% of the property value, taking out two loans to settle the amount would be against the law. Because the risk of default remains.

But if personal credit is intended to settle consumer, automobile, or even housing credit installments (already contracted), it is possible to proceed. If you are considering it, contact a credit intermediary to help you for free, with doubts and with contracting. The mediators of Poupança no Minuto take care of the entire process with the banks, presenting you with the best proposals and helping you choose the most suitable one for you.