Today, a huge number of people use or used the credit services of banks, because they have become much more affordable, and the economic situation in the country has been and remains more or less stable.
Repaying a loan in a timely manner is good, but many borrowers, arranging a loan, assumes its early repayment in order to save their money.
What you need to know about early repayment of a loan?
Before the entry into force of the law, banks abused their powers and applied a number of measures that significantly limited the ability of borrowers. For example, they applied fines for the early repayment of credit debt, levied commissions for this, and limited the limit on the amount that could be repaid.
With the introduction of the law in 2011, banks were banned from pursuing such an aggressive policy with respect to their customers.
However, unscrupulous financial institutions still find ways to circumvent the law:
- charge a fee for the services of an operator to recount the calendar of loan payments;
- initially increase the interest on the loan to cover their potential losses;
- establish the terms when it is possible to repay a loan ahead of schedule;
- control the limit of the amount that can be paid as prepayment;
- those who make a loan payment in advance are not issued loans again.
All this happens because the bank considers early repayment as a loss of its income with which they do not want to part, and therefore they are trying by all means to discourage the client from the desire to pay off the debt ahead of schedule.
Loan repayment terms
If the borrower anticipates premature repayment of the loan in advance, then he should take care of this issue even before applying for a loan. The conditions regarding the early repayment of the loan must be included in the loan agreement.
As a rule, it indicates:
- Timing when you can start early repayment. Often this can be done not at the very beginning of the payment schedule, but after the payment of half the debt.
- Amount to be paid as prepayment.
- Is the option of full repayment of the loan prematurely possible?
- Whether a fine or penalty for early repayment is imposed and what are the associated costs associated with this action.
- Whether the amount of debt and the amount of interest at early repayment will change.
If the loan agreement does not give answers to at least one of these questions, then it must be clarified with the loan consultant. It is also worth knowing what documents govern the missing clauses in the contract, and how often they change.
How to pay off a loan ahead of schedule?
By depositing money in advance, the client expects to receive benefits in the form of a lower cost of the loan, but this is not always the case. It all depends on the terms of the loan agreement and the scheme by which the loan is issued.
There are two ways to repay a loan:
- Annuity when the fee is paid in equal installments.
- Differentiated when each subsequent payment becomes less due to a decrease in the loan body.
In case of early repayment of the debt, a differentiated payment scheme is beneficial, since it implies a decrease in the main debt and, accordingly, accrued interest.
It is not so easy to repay a loan ahead of schedule, for this it is worth going through several stages:
- It is necessary to notify the bank that the client wants to make a premature payment. The deadlines for such a notification can vary from 3 to 30 days. Most often, for such an alert, a standard application form is used, which must be filled out at the bank and given to a credit adviser.
- Before you make money at the cash desk, it is worth clarifying your debt to cents. This is necessary in order for the loan agreement to be considered closed, because if the client does not pay a few cents, then the debt will not be written off. In addition, with full early repayment of the debt, the bank will be obliged to recalculate the amount of debt and reduce interest.
- Payment of the balance of debt. The bank will conduct this operation not on the day of payment, but on the date of the next next payment, since interest and fees for this period will be included in the final payment.
- After payment, you should contact the bank and get a certificate on closing the loan agreement to remove all issues.