What are Early Repayment Charges? How do they impact loan repayment?
Must Know Details about Early Repayment Charges
You will often find in the small print of your loan, a term called ‘early repayment charges’. What is it and how cam it impact your loan? Well, this is a smart and calculated step by loan providers who cannot forego any interest on loan repayment. They impose early repayment charges on people who pay off their credit balance early. The business reason behind this is that if a person repays earlier than the scheduled time then the company will not get interest incurred over the repayments.
Many of the loan providers apply an early repayment charge which is equal to one or two months of interest on the loan money. This charge is also referred by different names:
Early repayment charges
Early repayment penalty
Early redemption fee
The Consumer Credit Regulations 2004 gives the lenders the power to charge up to 58 days of interest if any customer repays the total amount of the loan earlier than the total loan repayment time. The loan provider can access this right and charge you some extra money. However, they cannot charge it if it is not been mentioned in the loan documents. So, read your loan document in detail and see if you are liable to pay these charges or not.
How redemption charges impact loan?
An early repayment charge may add up a considerable cost to your loan amount. You must ask your lender about any of the hidden charges. Read the small print in detail to check if you need to pay these charges or not. Also, you can negotiate with the loan provider and see if there is any reduction in this penalty.
How to avoid early repayment charges?
First of all you must check which loans apply the redemption charges. If possible then choose the one with no financial >penalties. There are many loan companies which would not charge a penny from you in the event of you paying back the loan early.
However, you have to keep in mind that if you are merging all your loans and converting it into a debt consolidation loan then you still need to pay for the early redemption fee.
Ask your loan provider about these charges before finalising the loan. You can also find which company charges Early Repayment Penalty’s on freepricecompare.com.