Is It Wise To Pay a Debt With Another Debt?

How subrogation works and when to use it

Disclaimer: I’m not a financial advisor. This article is for informational purposes only. It should not be considered financial or legal advice. Consult a financial professional before making any significant financial decisions.

What is subrogation

According to, a subrogation consists of replacing one creditor with a different one.

After the subrogation occurs, the debtor will pay the substitute creditor, also called subrogee, who now has all the original creditor’s rights.

Law requirements for subrogation change according to the country; that’s why I don’t want to go much into details that might not be valid for the place where you live.

Before signing a loan document, make sure you completely understand what’s written on it.

Sometimes we assume that the appointee who handles us the papers explains everything in plain English (or whatever other language you might speak). While the clerk might be trying to help us, he might also be looking to speed up the application skipping essential details we must know, which might cause us trouble in the future.

Why you might want to change the initial credit company

Let’s assume you bought a house a few years ago. You signed up for a mortgage with the bank recommended by the real estate agency because no other bank was willing to give you the money.

Some years have gone by, your credit score is now higher, you earn more, and your bank is willing to step in paying off your previous mortgage and offering you a new one with a lower interest rate.

The situation above is the most common I’ve seen in several years of work as a tax return clerk.

In some cases, buyers decided to go for a variable interest rate finding themselves paying every month more and more money.

Some banks don’t accept to pay a mortgage under a certain amount or close to the end, but if yours is just a few years old, you might want to check what other credit companies offer you.

When you apply for a mortgage subrogation, the bank or company that takes over will pay your debt with the previous creditor on your behalf. From that moment, you will have to pay the installments to the new creditor according to the latest agreement.

One new loan to pay several previous ones

I love to pay the costs of the products I buy right away, but I have the feeling that pay in installments is available for everything nowadays.

Whether you buy a pair of jeans or a new expensive phone, every website or store offers you the chance to split the payment.

It’s so easy to do, and you can quickly lose control over your debt.

That’s why signing up for a new loan and use it to pay off all your debt might be a good idea.

You will find yourself with just one rate to pay, which might help you keep your financial situation under control.

It might not be your choice

Last but not least, when signing up for a mortgage or loan contract, make sure to check if your current creditor can sell the credit to another company.

When a bank or a company sells its credit usually sends a notice to the debtor, and the terms of the agreement might remain the same.

🇮🇹 bookkeeper & content creator, blogger & PoD seller. Curious, food addict, animal lover & solo traveler. I write about money, food, travel & human behaviors

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store