Loan refinancing in Armenia in 2025: How to reduce loan payments and save money

Loan refinancing is when you transfer your loan from one bank to another. In fact, it is the registration of a new loan to repay the existing one. Refinancing allows the borrower to improve the loan: get a better interest rate, extend the term and reduce not only the monthly payment but also the total overpayment.

Imagine that three years ago you took out a mortgage at 14% per annum, which was a normal market rate at the time. But today the situation has changed and now banks are already offering loans at 9%. Every month you pay 50,000 drams, and if you refinance the loan, the payment will be reduced to 40,000 drams. That's a saving of 10,000 drams a month - in one year you will save 120,000 drams! This money can be spent on renovations, travel or simply less worrying about payments. All you need to do is apply for refinancing.

What are the advantages of refinancing a loan in Armenia in 2025?

In recent months, there has been a downward trend in the key interest rate in Armenia. On February 4, 2025, the Council of the Central Bank of Armenia decided to lower the refinancing rate by 0.25 percentage points and set it at 6.75%. This is the 14th consecutive rate cut since June 2023, when it stood at 10.5%.

This will have an impact on interest rates for loans and deposits in the coming months. Which means that it will be possible for people to refinance their loans on more favorable terms.

Pay close attention to the following when refinancing

If, after reading the above information, you are already thinking about re-lending, there is no need to rush! There are some nuanced terms and conditions that can lead to additional costs. Pay close attention to the following details to avoid overpayment:

Additional services and feesSome banks charge fees for processing a new loan, early repayment of an old loan, or other unexpected fees. A new bank may offer mandatory insurance, paid services, or accounts with high fees. Check to see if these services can be waived or if they will increase your final overpayment.

1. Extending the loan termIf your loan term is extended, your monthly payment goes down, but your final overpayment goes up. Compare how much you'll pay on the new loan in the end.
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3. Differences in payment schedules

Find out when your new loan payments will begin to avoid having to pay both your old and new loan at the same time.

1. Differences in interest rates

Compare your current loan rate to the new one. The reduction must be substantial to make a significant difference. Determine if the rate is fixed or floating; a variable rate carries the risk of increased overpayments.

Before refinancing, calculate the total cost of the loan, compare the overpayment, and check all the terms with the bank.

Which banks in Armenia offer refinancing?

Several Armenian banks offer refinancing programs under different conditions. The table below provides a concise overview of three such offers:

Refinancing is often seen as a favorable solution, but banks do not always approve it. Rejection is often related to the borrower's financial situation, credit history, or the specifics of the loan.

The primary reasons for rejection can be:

Refinancing is often a favorable solution, but banks do not always approve it. The reasons for rejection include:

1. Bad credit history
2. Low income
3. Large credit load
4. Problems with documents
5. Features of the current loan
6. Age restrictions

How to refinance a mortgage?

Examples of banks offering mortgage refinancing:

1. IDBank offers loans secured by real estate with an interest rate starting from 7.5% per annum and a repayment period of up to 240 months. The maximum loan amount is up to AMD 125,000,000 or USD 250,000.

1. AMIO Bank refinances mortgage loans with an interest rate starting from 1.5%. AMIO Bank also offers additional benefits, including extending the loan term, no income analysis required, and collateral coverage.

If your refinance application is denied, know that you have options.

1. Improve your credit history: close delinquencies, steadily pay off current loans.
2. Confirm your income by providing references and finding official employment.
3. If your application is denied, try applying to another bank with more favorable conditions.
4. Consider alternative ways to reduce the debt load, for example, debt restructuring.

If you don't have the opportunity to refinance, below we’ll consider several ways to reduce your debt load.

Lifehacks for effective loan management

1. The snowball method: Pay off the loans with the highest interest rate first to minimize the total amount of interest paid over time.
2. Negotiate with your current lender: Ask your bank to renegotiate the terms of your loan. A lower refinancing rate is a solid argument for reducing the interest rate on your loan.
3. State subsidized programs: Armenia has programs to subsidize interest rates on loans, especially in the agricultural sector. Check out the opportunities to participate in such programs.

Don't rule out alternatives to refinancing!

If banks do not offer suitable refinancing programs or you are not satisfied with the terms, consider the following strategies to reduce your debt load on your own:

1. Increase your monthly payments: This will reduce the term of the loan and your total interest overpayment.
2. Additional income: Find additional sources of income to use the funds generated to accelerate loan repayment.
3. Finally, budget and cut costs. Analyze and optimize your personal expenses to free up additional funds to service your debt.

Alternative ways of re-lending

If traditional bank offers are not suitable, consider alternative ways of re-lending. These are useful in non-standard situations where you face rejections or want more flexible terms.

Here are a few refinancing options that should be considered if traditional bank offers are not suitable:

1. Credit cooperatives and credit organizations

Some credit organizations offer refinancing loans with more flexible terms than banks. They can take into account non-standard incomes and offer customized terms.

Examples in Armenia:

1. Varks.am: This microfinance organization provides fast loans with minimal borrower requirements.
2. G&A: Based in Yerevan, this organization offers microloans for various needs.
3. Ayo Credit: Another credit organization in Yerevan that provides microloans with flexible terms and conditions.

Pros: more loyal conditions, possibly without collateral.

Minuses: higher interest rates than in banks.

2. Using collateral to attract more favorable conditions

If you have real estate or a car, use them as collateral to get a loan with a lower rate and use these funds to repay the old loan.

Pros: lower interest rate, higher loan amount.

Cons: risk of losing the collateral in case of default.

3. Refinancing through the employer

This method involves the company offering its employees the opportunity to renegotiate the terms of their existing loans on more favorable terms. Some large companies offer their employees loans on favorable terms (such as corporate mortgage programs). You can take advantage of this if your company provides this opportunity.

Pros: low interest rate, possibility of automatic deduction of payments from the salary.

Minuses: limited range of employers, attachment to the company.

Important: Before signing up, read the contract carefully, especially about how the terms of the loan change in case of your dismissal.

4. Refinancing for salary clients

In Armenia, some banks offer special conditions for employees of companies participating in payroll projects. Examples of such programs are presented below.

VTB (Armenia)

1. Salary project: The bank offers a single preferential package for clients participating in the salary project. Among the benefits.

1. Consumer loans: up to 12 times monthly income at preferential interest rates from 11% to 17.6% (effective interest rate 13.6%-22.2%).

1. Loan refinancing: possibility to combine loans from different banks or credit organizations into one loan with more convenient monthly payment.

1. “Bank at Work” service: a bank employee can visit your organization, provide individual consultation and accept the loan application on the spot.

These conditions make the refinancing process more accessible and convenient for the employees of companies cooperating with the bank under the payroll project.

VTB (Armenia)

Refinancing program: VTB (Armenia) offers its clients to buy out loans against the collateral of property from other banks and credit organizations. The new product gives an opportunity to customers with positive credit history to transfer their loans secured by property from other financial organizations to VTB (Armenia) under improved conditions, thus easing the further monthly financial burden of customers.

5. Using international programs

If you are able to borrow from a foreign bank or use international investment funds, it is possible to get lower interest rates.

Examples:

1. Refinancing programs for the Armenian diaspora from international funds. Banks in Russia, Europe, or the US offer loans to Armenian residents.

Advantages: access to low interest rates in foreign banks.

Disadvantages: the formalization process is complex, and income must be confirmed in another country.

6. Combining loans with friends or relatives

If you have close people who also want to refinance loans, you can combine funds and get more favorable terms from the bank.

Pros: more opportunities to get a better rate.

Minuses: possible conflicts in repayment.

7. Currency refinancing

If you have a loan in Armenian drams and your income is in foreign currency, you can try refinancing in a currency with a lower rate (e.g. dollars or euros).

Pros: the rate may be lower than in AMD.

Minuses: possible exchange rate risks.

8. Loans with simplified processing procedure

Some banks in Armenia offer loans with simplified procedures, which can be used for refinancing.

Example:

VTB (Armenia): Offers consumer loans without collateral and guarantors for various tasks, including refinancing. Decision on online application is made in 15 minutes.

Conclusion

Refinancing in Armenia in 2025 is the most effective way to reduce your debt load, lower your interest rate, and optimize your loan obligations. However, it is crucial to consider all the nuances, including fees, payment schedules, and contract terms.

The best option depends on your financial situation:

1. If you have a stable income, refinancing in banks is more profitable because they offer the lowest interest rates and flexible terms.
2. If your finances are less stable, consider debt restructuring or seeking out MFIs and credit cooperatives, which often have more flexible terms.
3. If you have collateral, such as real estate or a car, you can use it to negotiate a lower interest rate and get a better loan.

Don't limit yourself to bank offers. Consider alternative strategies:

1. Increase your monthly payments to reduce overpayments.
2. Finding additional income to accelerate repayment is also essential.
3. Optimize your budget and reduce unnecessary expenses.

Before making a decision, it's crucial to thoroughly compare offers, calculate the final overpayment, and consider all potential risks. Choose the right refinancing strategy to reduce your payments and improve your overall financial situation. See all the current offers from banks at AFM!