You’ve heard of credit portability. It is the transfer of a debt between financial institutions. Learn the advantages of this strategy and how to apply it!
It was a tempting offer, and Ricardo needed the resources to invest in expanding the company and attracting more customers. So he closed the deal and took out the loan with the bank. After a few months, he found another financial institution with payment terms, interest rates and many more competitive terms. Can Ricardo transfer his debt? Yes you can, and this operation is called credit portability!
Portability is an important way for the business owner to reduce their costs. Despite being an action accepted by the Central Bank since 2013, many entrepreneurs are still unaware of this strategy or do not know how to do it. But do not worry. That’s what we’ll talk about today!
What is credit portability?
- When Is It Worth It To Do The Credit Portability?
- What are the benefits?
- Can the financial institution refuse?
- How to transfer debt?
- How long does it take to get this information?
What is credit portability?
Credit portability consists of the transfer of the credit operation from one financial institution to another. We can include here loans , financing, pension, public or private, real estate credit etc. It can be requested by both individuals and legal entities, simply find an institution that grants a new credit and removes the debt in the original institution.
The idea is that this new institution guarantees more favorable conditions. If you can find it, the current institution is required to grant credit portability.
When Is It Worth It To Do The Credit Portability?
The main aspect to consider are the interest rates, to assess whether they are advantageous or not. But this is not the only component of this account. Keep in mind that the new financial institution may charge fees for opening credit, registrations and other charges. These hidden costs can take away the strategic advantage of this operation.
So, before applying for credit portability, it is important that you review the entire service package to ensure that the lower interest rates outweigh the other fees. One of the best ways to make this clear is to ask for simulations that will make the figures more concrete.
What are the benefits?
The main advantage of credit portability is the transfer of a debt to an institution that has lower costs. For example, let’s say your company has debt with credit cards in installments. You can use this strategy by negotiating with another institution to take out your debt and pay you with better terms.
The example of credit card is interesting because this kind of financing has high interest rates, and making a debt swap in that case can be very advantageous.
Renegotiating the financing of a property through the portability of credit is also very worthwhile. A fall of only 0.5% per annum, for example, may represent a significant difference in the amounts paid monthly. This is because this type of funding extends for many years, sometimes for decades.
Thus, credit portability is well worthwhile for long-term and high-value operations, as any deduction, however small, will have a very large impact at the end. And the interesting thing is that if the financing or loan is old, it is possible to get even better proposals, since interest rates were higher years ago.
In addition, it must be taken into account that, even if you do not carry out the transfer of your debt, the negotiation itself may result in better conditions in your own current institution, which wishes you to remain there. This is undoubtedly a great experience for you to learn how to seek out and bargain for better conditions in the next operations of your company. Along this route, you will learn about new institutions and become more informed about the processes involved.
The advantage of portability is not only in values. In many cases, users complain about poor quality of care in the current institution or difficulty accessing information. The exchange of institutions gives the opportunity to enter into a new relationship that is more productive, of better quality and with less or equal costs. And even if they are a little bigger, it might still be worth it if the conditions are better.
Can the financial institution refuse?
The portability of credit is a right of the user. Thus, the current institution is bound to accept. Unfortunately, it is still possible to perceive much resistance to grant this transfer. Sometimes they flood consumers with various bureaucratic procedures that delay or make the operation unfeasible.
Thus, if there is a refusal, the first step is to inquire with the new institution about the justification that the process has not been completed. If the institution has refused, it is possible to file a complaint on the website of the Central Bank using the following data:
- name of the institution of the new proposal;
- number of portability in the CIP (Interbank Payment Chamber);
- contract number of the credit operation (financing, loan, etc.);
- the date on which portability was requested electronically in the CIP;
- reason of the refusal given by the current institution.
On the other hand, the new institution is not obliged to accept portability, being at the discretion of it to assume the debt of the user or not.
How to transfer debt?
Credit portability is an important strategy for reducing your costs in your company. So it is necessary to have good planning , patience and research to find better conditions. Here are some steps you need to do:
- request the full amount of the credit operation in your current institution (remembering that the amount transferred will be the remainder of the debt);
- look for institutions that are willing to pay off their debt and accept portability, bringing together all the costs involved (mainly CET – Total Cost Effective, which covers not only interest but also other fees);
- make comparisons between the proposals presented through the CET analysis – these more competitive values will be the basis for you to negotiate with your current institution;
- present the best competing proposals;
- if your current institution does not offer a better offer, migrate to the one that provides more advantageous terms;
- inform the new institution;
- now just wait, because the rest of the processes will be done between the institutions.
How long does it take to get this information?
According to the Central Bank, the original institution has up to five business days to present a counterproposal to you. If you do not accept it, it will pass all the information to the new bank to finalize portability. However, if you accept the new proposal, it will be necessary for you to submit a formal withdrawal request as soon as possible.
Credit portability needs to be analyzed in order for it to bring more benefits than a headache, after all, the relationship with a financial institution is long-term. Analyze all the values and be careful about married sales of institutions that embed insurance and other services that end up raising the debt. By following these steps, this strategy will be a success!