There are many reasons why people have to take out a loan, for example you might be faced with an unexpected cost and find that a short term loan will help you out of financial difficulty. Other types of loan include credit cards, bank overdrafts, bank loans, and loans obtained through financial services memberships.
Before signing a contract the lender needs to provide you with full details of the loan, how much you are borrowing, how much you will need to pay back, the size of the installments you can pay in, and when you can pay the loan back.
Do I need to tell my lender I’m paying back the loan early?
To pay back a loan early you need to inform your lender in writing that you wish to do so and ask them to send you an “early settlement amount” which will give you the amount you will need to pay off in full.
This amount will include all interest and charges you need to pay back, although in paying the loan off early you will get a rebate for these costs.
What happens next?
The lender will then give you 28 days from the day you requested the information to pay off the loan in full. However, if you change your mind you can continue to pay in instalments rather than paying the full amount.
Can I pay part of the loan off?
You can pay part of the loan off in a larger amount than your usual instalments; this is known as a “partial early settlement”. By doing this you will still get a rebate for the interest and charges, although it will be smaller than if you pa
id the loan off in full.
You will need to check your agreement to see if making a partial payment will affect the way you pay off the rest of the loan. If your contract doesn’t give details about how partial payments affect the rest of the loan contact your lender and negotiate a reduction in your instalment amounts or paying off the instalments over a shorter period of time.
What happens next?
You will need to tell the lender of your intentions either verbally or in writing and you will then have 28 days to make the payment. After payment has been made your lender can then confirm how much is left to be paid and how this will affect the rest of your instalments.
It doesn’t matter what kind of loan you’ve taken out, from bank loans to loans obtained via financial services, for example Loans Direct or Norton Finance,paying off a loan early can give you peace of mind and red
uce your financial burdens.
It can also give you a sense of satisfaction to know that you’ve managed your money well enough to be able to make a partial or full settlement on your loan. Early loan repayments can also help to improve your credit score.
About the Author: Wendy Lin is a successful free-lance writer and businesswoman who is enjoying her quiet life since moving to England.