You have taken out a loan. Perhaps you needed money quickly to purchase expensive products, such as a washing machine or a holiday. Or maybe you are ready for a new vehicle, but you do not have sufficient cash to buy the vehicle yourself. Also the purchase of a house is often dependent on a loan. These costs can be financed well with the help of a loan. Your repayment is determined based on your income. Not only the terms, but also the amount of the amount to be repaid and the interest you pay on this. But what if you want to pay off your loan sooner?
Pay off a loan early
A loan is usually fixed. The repayment terms are also predetermined. When you are eligible for a loan, the bank or lender will pay you interest on the amount to be repaid. This usually takes place in installments, to make it as attractive as possible for the lender. The longer you do afterwards, the more interest is usually paid. You can also choose to pay back early.
A loan, and in particular a large loan, will commit you for a number of years to the financial institution where you took out the loan. However, it is possible that your personal situation will change, and your financial situation will also change. In case of a financial windfall, for example, or if you want to sell your house before the loan has been fully paid off. You can then choose to pay in advance. An early payment is possible with all financial institutions. It is also possible to pay back part of the capital in one go. This is often at least once a year.
How much does the early repayment cost?
However, an early repayment is not always interesting. After all, there are often costs involved. These costs are often grouped under the name ‘reinvestment fee’. After all, the financial institution loses interest, which you would pay with a normal refund. The fee for early repayment is usually calculated in a fixed way. In addition, document costs are usually settled.
Early repaying your loan is therefore certainly possible. With all financial institutions you can easily repay your loan earlier. In most cases you are more profitable. Nevertheless, it is wise to always check in advance how much you actually win with the early repayment of a loan.