How to pay off your cash loan quickly?
Do you have a cash loan? You can pay it back faster than the contract with the bank indicates. It is enough to overpay the loan whenever you have the financial opportunity. How to do it and how banks react to faster cash loan repayment?
The most advantageous option from the borrower’s point of view is an earlier repayment of the debt once, regardless of the title. However, it is possible if we have, for example, low-value cash loans. With cash loans taken out often for tens of thousands of dollars, it is much more difficult.
Ways to pay off your cash loan quickly
With higher incomes that the customer can start to receive in the course of repayment of a cash loan, overpaying the cash loan is possible. How to use extra cash? You can, among others, repay multiple principals and interest installments of a cash loan. Then the loan repayment time can be significantly shortened and with it the costs of borrowing.
Another option is full repayment of the cash loan ahead of schedule – it can be made by customers who suddenly have a much better financial situation. Earlier, faster repayment of a cash loan is also possible if we sign an appropriate annex with the bank, allowing for shortening the loan period and increasing the principal and interest installment that the customer will repay every month.
When setting higher installments with the bank, the customer must have higher creditworthiness than when taking out a loan, because otherwise, the bank may not agree to such an operation.
How do you pay off your cash loan ahead of schedule?
At the beginning, it is worth saying that early repayment of the loan in legal terms is completely possible. Pursuant to the amended Act of 12 May 2011 on consumer credit, the borrower has the right to repay the cash loan earlier. The condition is that the loan is considered a consumer loan.
Pursuant to the law, consumer credit is a credit granted for payment to the consumer in an amount not exceeding USD 255 550. It is granted for any purposes unrelated to business activity. Proves. Art. 3.1 of the Consumer Credit Act.
Early, early repayment of consumer credit can be made in whole or in part. It is enough to overpay the loan with subsequent installments or transfer the entire amount of outstanding capital, and then close the bank’s credit account.
Early repayment of cash loan and costs
In some cases, when the customer repays the cash loan earlier than it would appear from the signed loan agreement, the bank may compensate for the interest lost in this way by calculating the commission. It should be reserved in the loan agreement.
Banks are not entitled to charge any compensation for an earlier partial or total repayment of cash loans. According to regulations, it may not exceed:
- 1 percent part of the loan to be repaid, provided that the period between the loan repayment date and the loan repayment date is longer than a year;
- 0.5% part of the loan to be repaid, provided that the period between the loan repayment date and the loan repayment date is less than one year;
- the amount of interest that the consumer would be required to pay in the period between the repayment of the loan before the deadline and the agreed contract completion date;
- direct costs incurred by the bank in connection with the repayment of a debt by the customer.
Is quick repayment of a cash loan profitable?
Early repayment of a cash loan can be very profitable, especially if the bank does not charge any commission for such an operation. At the same time, the customer may, under the provisions of the Consumer Credit Act, obtain a refund of part of the costs, even those incurred when signing the contract. This is because the total cost of lending must be reduced by the costs for the period by which the duration of the contract has been shortened.
Fast cash loan repayment – what do banks think about it?
Chapter 4 of the Consumer Credit Act contains provisions governing the repayment of credit obligations. The bank cannot agree to the early settlement of debts, in connection with art. 48 of the Act. The consumer has the right to repay all or part of the loan before the date specified in the contract, at any time. The creditor may not make the early repayment conditional on the consumer being informed of this intention.
Sometimes early repayment of a cash loan may be dictated by the fact that the customer has the option of incurring other obligations on much better terms. The ranking of a cash loan or comparison of such loans will help him find the right offer for a new cash loan.