Repayment of personal payday loan

The personal payday loan is in principle used to spread funding over several monthly payments. However, if a cash inflow occurs, it is possible to repay his personal credit in advance.

The principle: a repayment of the personal payday loan spread over several monthly payments

The principle: a repayment of the personal loan spread over several monthly payments

In principle, the repayment of a personal payday loan is made by paying monthly payments, the number and amount of which depend on the amount borrowed, the possibilities and the will of the borrower. Generally at a fixed rate, the monthly repayment of a personal payday loan remains the same throughout the loan. They are usually not intended to evolve. However, the borrower can decide to prepay the amount he owes to the lender.

Prepayment of the personal payday loan

Prepayment of the personal loan

A cash inflow can decide the borrower to repay his personal payday loan sooner than expected. This is called early repayment of the personal payday loan. This modality is a right for the individual which is provided for by article L312-34 of the Consumer Code: “The borrower can always, on his initiative, prepay, in part or in full, the credit which has been agreed. “

The early repayment can therefore relate to the entire amount remaining due, or only a part, in order to reduce the number and / or amount of monthly payments.

The penalties due to the early repayment of the personal payday loan

The penalties due to the early repayment of the personal loan

The credit institution is entitled to request penalties for early repayment of the personal payday loan by the borrower. It should be noted that this possibility has only been offered since the Congilaw Company of May 1, 2011. No penalty can therefore be claimed for personal payday loan contracts prior to this date. In addition, the possibility of compensation must be stipulated in the personal payday loan contract.

The amount of prepayment penalties

The amount of prepayment penalties

The amount of penalties that the lender can request from the borrower in the event of early repayment of the personal payday loan is governed by law. In fact, since the Congilaw Company of May 1, 2011, the early redemption indemnity (IRA) cannot exceed 1% of the amount of the loan. In addition, if the remaining term of the credit is less than 12 months, the penalty must be less than 0.5% of the amount. In all cases, the amount of penalties cannot exceed that of the interest that the borrower would have had to pay if he had continued to pay his monthly payments according to the initial repayment plan.

Categories: Payday Loans

What is an Early loan repayment?

Everyone has the right to early repayment of consumer and mortgage loans. Does this solution always pay off? If you have such an opportunity, it is worth analyzing it in detail and making a reasonable decision Repayment of the loan before the deadline is unfortunately not always beneficial for your wallet. for the borrower. So when does it pay off and when should such a decision be made?

Is it possible to pay back the loan earlier?

Is it possible to pay back the loan earlier?

According to the Office of Competition and Consumer Protection, every person has the right to repay the loan earlier, before the expiry of the last payment included in the contract.

However, banks do not always favor such a solution and that is why it often happens that you do not save as much as you would count on. In addition, the terms of early repayment of the loan obligation are regulated by the Anti-usury Act. There are a few rules to keep in mind so that this operation is really beneficial for you.

Are there any early repayment costs? Margin, bank commission, and other additional fees.

The bank is an institution that earns money by granting loans to individual and business clients. Therefore, if you pay your liability in advance, you must consider all the costs associated with it. These include not only outstanding capital but also the amount of accrued interest and other types of additional fees and commissions.

Bank’s margin

One of the costs to keep in mind is the bank’s margin, which increases as the loan repayment period expires.

Early repayment commission

Early repayment commission

The contract often has a provision that protects the lender from losing this money, talking about a commission on early repayment (compensation commission). It varies depending on the type of contract, the bank and the general conditions for granting the loan, and usually ranges from 1% to 3% of the capital.

It is therefore worth analyzing the costs associated with this additional fee and compares them with the outstanding interest amount.

If it turns out to be lower, early repayment pays you the most. Some banks exempt their clients from paying a compensation commission after a period of time specified in the contract has elapsed, this may be a year or several years, as in the case of mortgage loans. In such cases, having the option to pay back the capital will make the decision for you.

Overpayment of monthly loan installment. How will the bank settle it?

Overpayment of monthly loan installment. How will the bank settle it?

It is worth remembering the provisions in official acts, namely in the opinion of the President of the bank should reduce (including the period from the date of actual repayment to the date of final repayment) all fees, commissions, and costs, as well as return them to the customer.

This is the official position, from which any deviation is treated as a violation of the law. Banks are often reluctant to provide such returns, which is why the consumer’s knowledge of the regulations is an added advantage for him. One of the solutions for early repayment of the loan, both consumer and mortgage, is its overpayment, i.e. the repayment of an amount higher than the monthly installment. The bank can settle this in two ways:

  • shortens the loan period (the value of monthly installments remains unchanged),
  • will reduce the value of monthly installments (the loan period remains unchanged).

Is it worth paying off your mortgage early?

Is it worth paying off your mortgage early?

The above rules also apply to the early repayment of a mortgage. The benefits of this are unambiguous, but you should also carefully analyze all the pros and cons associated with it. The time when the bank may request an additional compensation commission, as well as its percentage value, depending on the terms of the contract. As a rule, however, this is a consumer-friendly operation.

Early repayment of the loan can bring great benefits, not only financial but also psychological and emotional. When you have such opportunities, it is always worth considering such a solution. However, you should remember to analyze all costs, including those not always obvious to you as a consumer.

For the borrower, early repayment of the loan is beneficial in the first repayment period, when in most cases the repaid installment mainly covers interest and only a small amount of capital. Banking law guarantees the possibility of such repayment of consumer loans with a value below USD 80,000.

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