The vast majority of borrowers with cash loan, or a mortgage would like to repay it as soon as possible. This is not always possible, however, although you can always attempt to early repayment of at least part of the obligation. What will be the consequences of this step?
The costs of early repayment
When analyzing the cost of early repayment of the loan should be so demarcated. consumer loans and mortgages. For consumer loans, or obligations secured by mortgage, the amount of which does not exceed 255,550 zł (or its equivalent in foreign currency), the relevant law stipulates that the early repayment of the loan may be related to the accrual of additional commissions. Its maximum height can reach 1% of the value of the liability repaid earlier. It can be equal to 0.5% of the amount repaid if the period to the end of the repayment of the loan is less than one year.
In the case of mortgage loans each bank uses a slightly different rules for early repayment of the loan. Overall, however, it may be assumed that the fee for early repayment amounts to an average of 1-2% regularized before the date of the loan. This fee may be unfortunately higher for the initial period of settlement of the liability, ie, 2, or 5 years from the date of signing the contract.
Early repayment of the liability before the credit is also associated with two other consequences. This may be a reduction in mortgage payments or shorten the loan term. To shorten the period of the loan will be made if, if, after the repayment of the loan at the same level will be maintained its installment. Similarly, when the term of the loan will not be shortened, installment obligations will be reduced. This will be the consequence of a smaller amount of capital remaining balance, and hence the lower the amount worked out by him for the years of interest.
With all this in mind, when making a decision on early repayment of part of the loan, make sure that this will incur additional charges and let's see what will be its eventual height. In addition, let us also, if we prefer to repay the loan at lower installments or installments of constant height, which will result in faster settlement of a liability.