Advice for Early Repayment of Loans

P repayment of the loan means to repay the entire loan before the scheduled date for repayment. If, during the loan repayment, you reach a certain sums of money with which you can dispose of, and you do not plan to deposit or invest the same for any other purpose. To free yourself of debt you can prematurely repay part or all of the amount owed on the loan. The conditions for this already depend on the specific product and business policy of the bank. In this way, it can also save you having in mind that such payments reduce debt, shorten the payback period, which significantly affect the total amount of debts owed to the bank.

Additional Expense

When early repayment must count on the additional cost imposed on banks in such cases and which amounts to 5 percent of the principal amount of the refund. Fees charged for this kind of loan repayment are applied in case of a total or partial repayment of debt. Of course, if the debt is repaid from own funds or refinancing by the bank where the credit was taken. The fee is usually higher in cases where the loan is refinanced by means of other banks.

In the contract that a customer concludes with the bank is precisely stated that the borrower can repay early to take a loan. This ability provides for long-term loans. Some banks also specify that the above can be applied only after a certain period. Usually that period takes to 5 years. Certainly it should be emphasized that it is always possible and deal with the bank in order to make best serviced the debt. Because it is in the interest of banks to avoid the problem about paying the debts of their clients.

Reduction of Debt

One of the most important factors that affect the total amount of debt in addition to the interest rate and repayment period on the basis of which it can be concluded that shortening the repayment period reduces the amount of debt, and thus can save a certain amount.

It is highly recommended because can shorten the repayment period or reduce the amount of monthly loan installments to repay. The above mentioned shall give particular attention in case of using long-term loans for which most of the debt in the later period of repayment does just the interest.

What Affects the Change of Interest Rates?

A change in interest rates affects primarily change of course, the reference of interest rate, consumer price index, inflation and the country’s credit rating. Based on the above, especially in the case of using loans with variable interest rates, it is essential to choose the right moment for repayment of all or a large part of the debt.

Based on comments from banks and their previous experience, it can be concluded that a relatively small number of loans are repaid prematurely. The reason for this can be a disadvantage in the form of compensation for early repayment of the loan or that people who borrow in this way generally have at their disposal a large sum of money to resolve existing debt.



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