Early repayment of a loan
If you have a loan in progress which you are repaying and yet you realize that you have the liquidity necessary to pay it off in advance.
Know that it is an entirely possible practice of early extinction , provided that a number of essential requirements are met.
In fact, by paying the remaining part of the loan in a single payment, you will also have to pay an early termination penalty , which is compulsory and is established when the loan is drawn up, but which in any case can not by law be higher than 1 % of the residual loan to be repaid. The reason for the penalty lies in a sort of compensation for the loan for the lack of interest.
Therefore, it is not always necessary to pay off the loan in advance. In the repayment of the installments, in fact, the principal to be repaid is taken into account in the majority interest before interest and in a minority share. It follows that the first installments are largely composed of interests. This is why it becomes expedient to pay off a loan in advance only when we are still at the beginning of the loan , thus allowing us to save considerably in terms of interest despite the penalty.
The same principle also applies to loans received by assignment of the fifth salary, which can also be repaid at any time with a penalty that can not exceed 1% of the residual capital. In this case, however, the costs relating to stamp duty and preliminary investigation will be lost.
The early repayment can therefore take place in order to settle the loan in advance of the time provided by the financial institution or the bank to which it has been entrusted. The remaining part will therefore be calculated in a single super-rate with residual interest recalculated also on the basis of the amount due.
To request early repayment it is advisable to send a registered letter to the loan financial institution asking for it, better still to go personally to the office to discuss it.
We will therefore have to know the details necessary to pay the remaining amount in a single bank transfer and will also be able to ask the Finance Department for a release that certifies that the loan has been settled early : in this way you will have no problem demonstrating to anyone that you need more funding in place.
The advantage of early extinction is all about getting rid of a monthly “burden” on your expenses, which you can allocate to other projects. Total interests will also be lower. The convenience to do so, as mentioned above, will also depend on when you want to proceed with the closing of the loan with respect to the stipulation date.