Using a personal loan like real estate credit is common today: it makes it easier to buy a house while having several years to pay its repayments. However, some people may, at some point, have some money available to pay their credit faster, before the deadline. But is early repayment really a good idea?
Early repayment: a right for the debtor
You have subscribed to a mortgage and following a new promotion, you realize that it is now possible for you to pay the refund of your credit with interest earlier than expected: know that it is possible to pay the entire amount your pre-term credit. Moreover, the sooner a refund is settled, the less expensive it will be. If you decide to repay your credit before the last repayment date set in advance, the bank will calculate what you will pay: the balance will include the principal, the interest already paid and a re-employment allowance.
At this point, you will need to remain vigilant about the calculations of your full refund prepared by the bank. It is essential to carry out a verification of the calculations, if there is presence of the mention “except error or omission”, which means that the financial institution can review its count in case of miscalculation. The debtor can also pay his repayment before term, partially, initially offering the bank, a higher amount than his usual monthly payment. He will then pay the same monthly amount to reduce the duration of his contract.
Avoid excessive prepayment fees
The ideal is to compare the prepayment methods adopted by each bank, to find the best offer that suits you. You can also choose to negotiate fees in case of early repayment, as soon as you subscribe to your credit: you will have the opportunity to reduce or even cancel them. Prepayment fees are one of the things you’ll need to worry about when choosing the bank where you plan to borrow money. Since a mortgage is repaid over several years, it is likely that during this period, your financial situation evolves. An early repayment is sometimes possible, but for this choice to be profitable, it is necessary from the outset to check the conditions of the bank.
Opt for early repayment: not necessarily a good option
Choosing to pay your loan or loan consolidation early is not without risk. You have to look at it wider, just to avoid thinking that if you pay it back sooner than you expect, you will definitely be free of debt. It is important to know that a pre-term repayment of a loan does not allow the bank to make a profit. To compensate for this loss, the bank demands a re-employment allowance. Generally, this compensation corresponds to three months of interest on the amount reimbursed. This compensation may also vary depending on the timing of the early repayment, that is to say if it takes place shortly or a long time before the expected term. The re-employment allowance may also include a release fee to terminate the mortgage or personal property loan . It is important to know that early repayment is not necessarily advantageous, as it deprives the debtor of certain tax advantages. However, it is possible to avoid these risks.