This article explains how to terminate your loan early, taking into account various options. If you want to terminate the loan years after signing the contract, this ignorance can have costly consequences. What to look out for when repaying a loan early & interesting facts about the policy rate & base rate, read here! The easiest way to save costs, such as a high prepayment penalty for the loan, is to misdirect the customer. When does the early repayment of a loan really pay off?
Early repayment penalty: You still want to pay off your loan amount early?
Many consumers only get the word premature repayment penalty if they pay off a loan amount early. Below you will learn what to consider in the event of early repayment and when it is in spite of the early repayment penalty. The early redemption fee must be paid by borrowers who withdraw prematurely from a loan agreement with the principal bank.
The amount of the early repayment depends on the residual debt existing at the termination date as well as on the contractually agreed interest and the remaining term of the loan. The current level of general interest also affects the amount to be paid. An early repayment can not be demanded of the banks, if the interest rates are already fixed for ten years.
An early repayment is also not possible if the loan was terminated by the principal bank itself because of late payment by the borrower or by mutual termination of the loan. The advance payment is used to offset interest losses when canceling a loan.
Because the house bank earns monthly income through you as a borrower through a fixed-rate loan business, by a already taken into account, eg after the half-repayment period dissolved loan business go down considerably. The earlier the loan is terminated, the greater the extent of the damage. In the case of early termination, therefore, a higher early repayment fee must be paid as it is calculated as a percentage of the balance.
For normal installment loans, the penalty for the prepayment is limited to 1% of the remaining debt of the loan and is therefore usually relatively large. In many cases, an early repayment of the loan may pay off. In this case, early repayments can quickly cost several thousand USD, since the remuneration is not legally secured. With a residual debt of USD 100,000, more than ten out of every hundred – that is more than USD 10,000 – of early repayment can be quickly calculated.
This is mainly due to the current low level of interest rates:
If the interest rates for a construction loan concluded some seven years ago were still relatively high, the house bank would no longer be able to raise so much interest today. So he does a great deal of damage through premature repayment and can lend the capital only “at a lower price”. You can only determine the exact amount of the required penalty for early repayment by asking the lender to calculate it.
Who wants to prepay his construction costs early can use an online calculator to determine the amount of compensation. When does early repayment make sense? In principle, an early repayment pays off whenever the penalty for the early repayment is lower than the residual interest charge. As a rule, the early repayment fee is not exactly defined, which is why it should be clarified with the financing bank prior to making a decision.
In particular, the early repayment of ordinary loans, ie installment loans, for the early repayment of which the Bank may not demand more than 1 percentage point of the remaining debt, is often useful. The question of whether an immediate repayment pays off always depends on the remaining term of the loan. A very high standard (above the allowable 1 percentage point for installment loans, over the average 10 percentage points for mortgages) should at least be checked by your financial adviser, but the expert can not usually look.
For a processing fee of about 70 USD will be charged, you will receive an opinion, which you submit to the house bank. With a very high demanded early payment fee, for example for a real estate loan financing, the effort for the consumer protection expert pays off in any case. If the house bank refuses to reduce the amount of the early repayment, although the report has a significantly different amount, you only have to turn to a lawyer who will continue to challenge the lawsuit.