A consolidation loan, like any other loan, should be repaid in a timely manner. However, it is best to repay it faster than the contract provides. Unfortunately, not all banks allow faster repayment of the loan and, consequently, reduction of its amount. badcreditpaydayloansrhpsd.com for more.
If we decide to restructure the debt and conclude a consolidation loan agreement, it is a good idea to check whether in the event that our financial situation improves, you can repay the loan earlier without paying interest.
The greater the amount of capital we borrow, the higher the interest on debt that we accrue annually. Therefore, early repayment of the loan significantly reduces its cost.
If we have a large amount of free funds, you can pay them back to your credit account once. Then go to the bank where you have a loan and ask for a payment for the capital to be credited. It usually involves filling in the appropriate form. This is very important because without our request to credit the previously paid money, they will be on an unpaid account and the bank will automatically collect only as much money as needed for the repayment of the next installment each month.
If, on the other hand, we do not have more cash, it is best to develop a savings plan that will allow us to accumulate capital that we can also repay at least part of the loan.
If anyone has doubts whether the early repayment of the consolidation loan is possible, he should calculate how much he can save on such an operation.
Let us assume that the capital that we borrowed from the bank in the consolidation loan is PLN 200,000. The loan is interest-bearing at 6.5% per annum and taken over a period of 30 years. By paying off such a loan in equal installments, we pay PLN 1264,14 to the bank every month, of which interest in the first month of repayment is PLN 1083.33. If after five years of paying off the loan, we decide to pay an additional PLN 10,000 to the bank and deduct it from the capital, we will shorten the loan period by about 2 years. The monthly installment will drop by about PLN 34. However, all debt is significantly reduced. Because initially taking a loan for 30 years and paying only monthly installments, we would give the bank PLN 455,088.75. however, after shortening the loan period, this amount will be 413 055,31. By paying PLN 10,000, we get PLN 42033.44.
After making such calculations, everyone should have an incentive to prepay the consolidation loan, the terms of which should be negotiated at the time the loan agreement is concluded.