If you are paying way too much out of your salary each month on debt repayments, then refinancing is probably your best option.

You will end up paying off the debt over a longer period, but it will reduce the monthly bill and free up your cash flow.

Local banks and credit unions offer the option of refinancing, where individuals with several loans want to consolidate their debt.

The result is often a single, lower payment with a lower interest rate as well, especially in cases where the borrower has several credit cards and hire-purchase debt.

Refinancing and debt repayment is very vital step as it will free up cash flow.

Reschedule payments

In mid-January, Scotiabank Jamaica extended an invitation to all personal-loan customers in good financial standing to visit the bank and renegotiate their loan terms. "We realise that some people are afraid when they know they are going to have issues, so we decided to call a lot of our good customers, even though they aren't in default, to offer them an opportunity to reschedule their payments so that they don't go into default," said Wayne Powell, executive vice-president for branch banking.

"We also have a programme for those who are already in default."

At Scotia, in order to get a refinancing loan of $200,000, collateral or security in the form of cash, real estate, motor vehicle or life-insurance policies which have a cash surrender value will be required.

The interest rate you get from the bank depends on what is being used to secure the loan. For real estate, interest rates at Scotia range from 22.75 to 23.75 per cent.

Better rates are offered to government workers who can get interest of 22.5 per cent per annum on real estate.

For a civil servant, the monthly payment for $200,000 for 24 months would be $10,425.08 per month.

If one is using a car as collateral the interest rate is 24 per cent-25.87 per cent per annum. The car would have to be no older than five years old, which would in the instant case be a 2004 model.

Cash attracts the lowest rate at 18 per cent.

Documents required for your loan application include a job letter, three consecutive payslips, mortgage or rent receipts, proof of current address in the form of a utility bill, for example, a statement of liabilities, a pro-forma invoice stating the balance on outstanding loans or hire purchase agreements, your national ID and your Taxpayer Registration Number .

The National Commercial Bank (NCB) offers clients in need of refinancing the Payroll Plus Loan, which requires no collateral but which carries a much higher inte-rest rate of 33 per cent.

There is also the option of a customer-reward loan offering a maximum of $1 million and on which the interest rate is 25.7 per cent.

Maximum financing

For the reward loan, a minimum balance of $15,000 in savings is required on a monthly basis.

Other loans offered by this institution include the NCB Home Equity Loan with maximum financing of up to $15 million for one's primary residence and $7.5 million for a second home with up to 15 years to repay.

NCB also offers a cash-secured loan to persons who are seeking the least expensive way to borrow money.

One can borrow up to 95 per cent of one's deposits while still having one's savings generate interest.

avia.ustanny@gleanerjm.com

Dave Dixon, branch manager at Scotia DBG Investments Limited, Ocho Rios.