One of the rights of every borrower is the option of early repayment. This applies to both bank loans and loans taken out of a non-bank company. Such regulations are introduced by the Consumer Credit Act. However, it should be remembered that the contract sets individual conditions for early repayment of the liability. It depends on these provisions whether the earlier return will be beneficial to us.
Conditions for early repayment of the obligation
Before signing a contract with a loan company, all its provisions should be reviewed. Particular attention should be paid to the conditions for early repayment of the loan. We’ll find out how we can close the open commitment. We will also check what reimbursement we can count on and how much money we will save on interest alone.
Earlier compensation is also associated with the concept of compensation commission. In this way, the loan company or bank wants to recover some of the fees that the customer would incur on further repayment. The Consumer Credit Act of 2011 introduces restrictions according to which the compensation commission may not be higher than 0.5 or 1% of the full loan amount.
Can early repayment save money?
Each monthly installment is associated with additional costs depending on the interest rate. Interest can often be a great burden for the wallet. By deciding to repay the liability earlier, we avoid paying further interest. If we incurred additional costs at the time of signing the contract, we can apply for reimbursement. For this purpose, an employee of a non-bank company will make calculations and inform us about the proportion of the amount we incurred is refundable for early repayment.
By closing the liability, we significantly reduce the costs associated with granting the loan. In addition, there will be a positive entry in our BIK history that will increase our credit standing in the future. In the vast majority of cases, early repayment is therefore a very cost-effective solution for the customer.