If you have heard about the replacement loan and still do not know what it means, stay with us because at Fundfind Finance we do not want you to continue with the doubt; since it is a term that you might need to know at some point in your life.
Refactional loan: what is it
A replacement loan is used in the construction, repair or conservation of real estate sectors. It is associated with these sectors because it is usually used for the acquisition of machinery or operating expenses in industrial, agricultural or livestock sectors.
To understand it better, after making the request for a refactional loan, the beneficiary undertakes to invest the loan money received in movable and immovable property that he needs for the development of the activity.
According to the RAE, a replacement loan is a type of credit that comes from money invested in manufacturing or repairing something for the person to whom it belongs or others who are interested in it.
That is, the creditor of a refactional loan executes the work in the property or supplies the necessary elements to carry it out. So it can be the builder of an industrial building or a company that has just made some reforms. These are some examples.
One of the peculiarities is that the replacement creditor has privileges over other creditors. This is because his money is what has made construction possible or, thanks to him, the value of the property has increased.
How is it different from a conventional loan?
As we say, a replacement credit is characterized by its purpose, because it helps improve the production capacity of a company or renew its assets. Therefore, given its purpose, it is usually used in industrial or agricultural sectors, not in personal finance.
Likewise, as we already told you, your applicant agrees to invest all the loan money in movable and immovable property necessary to carry out his activity. So you should do it this way.
It has neither the same characteristics nor the same requirements as a conventional loan, since it promotes the renewal of the fixed assets of a company. Also, the return period is usually about 7 years, although it depends on the financial entity.
Are there requirements to apply for it?
Normally, to apply for this type of credit, a series of requirements must be met. That is to say:
- Request an opening contract
- Have a checking account at the Entity that grants the credit
- Go through a Credit Study to check your creditworthiness
However, keep in mind that the specific requirements are specified by the bank in which you are requesting the replacement credit.
How to know what type of loan I need?
It is normal for you to have doubts about the loan you need to contract. However, if you are a private individual, a personal loan could be the financial product that best suits your needs.
In the case that you are a company and would like to make some renovation or buy furniture, we could be talking about the request for a spare loan.