Pay off an auto loan earlyUncategorized
When borrowing money from a credit institution or a bank, one undertakes to repay the monthly payments for a period determined by the loan agreement. However, it is possible to pay the amount to be repaid before the end of the loan if by chance one receives an extra nest egg during the loan period.
This is also valid for auto loans, but under certain conditions. However, how to do this without making a mistake? Here’s a quick guide to being able to pay off your car loan easily and without stress.
Read the loan conditions on the contract
In some cases, credit institutions refuse this early repayment transaction. But if the amount paid does not exceed 10% of the initial amount of the loan, you can repay the loan in advance without any problem.
To sell one’s credit is a right that you must assert! In any case, you should carefully read the clauses of the contract where the conditions of early repayment are detailed.
There are two refund options:
- the total repayment of the loan, which makes it possible to free oneself entirely from its often heavy monthly payments in everyday life,
- the partial refund, which allows to readjust either the amount of the monthly payments, or the duration of the credit. This also relieves the borrower a lot whatever the formula chosen.
You must know that the earlier you repay an early loan, the less interest you lose, so the more you make money! And for you, this can be truly beneficial financially and relieve you of a real weight in the household budget.
Are interest rates favorable for early repayment?
It is absolutely necessary to calculate what is the most advantageous: either pay off your car loan at a given moment of the loan to get rid of it permanently, or place this unexpected cash flow on a savings account that could earn more thanks to interest. Precise calculations and comparisons must be done before starting…
The Consumer Code imposes a number of rules on credit organizations:
If the loan involves a variable rate credit or a consumer credit, there will be no additional fees to be paid or penalty, provided that it occurs on an anniversary date.
But some banks claim compensation, from 0.5% (if less than a year before the end of the loan) to 1% (if more than one year before the end of the loan), in case the amount is higher to 10000 $.
That’s why you have to read the loan agreement on the day of the signing to know exactly what you’re going to do, so as not to be caught on the day when you have the opportunity to pay your credit. ! Always keep in mind that whatever happens, a credit remains a credit, and that the interest paid to the bank or any other borrowing agency is permanently lost to the customer.
So any early repayment requires reflection and calculation, just like any subscription of a car loan at the start.
In summary, if you have the chance to collect a welcome and unexpected cash flow during your car loan, you have every interest in paying all or part of the outstanding capital of this loan. However, provided you respect the rules specified above and be careful not to be too loser!