Many cash loan owners often consider faster total repayment or overpayment of a certain amount every month so that the loan closes earlier. They suggest that the shorter the loan period, the less interest.
This is the right course of thinking, but if the contract is already signed and the loan is running, before we start paying off with acceleration, we should carefully read all the records from the proverbial board to board. Many banks, being aware of lower earnings in the event of early repayment, secure themselves to some extent against this situation.
Bank usually charges a commission
In the case of an earlier full repayment, the bank usually charges a commission. Its amount is given in the loan agreement. The Consumer Credit Act introduced restrictions on this commission, which put an end to the banks’ arbitrariness. If we repay the entire loan more than 1 year before its planned repayment schedule, the bank has the right to charge a maximum of 1% of the sum repaid faster.
If it is less than 1 year to the end, it cannot be a commission greater than 0.5% of the sum repaid. Some banks use a different type of commission. They set it in the contract for a specific amount from each earlier repayment, whether partial or total. Often it is PLN 100. In the case of full repayment, this is a very good situation, worse if we want to overpay every month, then we will have to pay an additional PLN 100 commission every month.
When it is better not to overpay the loan
There are certain situations on the financial market when it is better not to overpay the loan. This happens in the case of a loan taken out in a foreign currency, when its price is very high and it can be expected to decline in the future. If we repay the loan earlier when the currency price is high, then we will have to pay the bank more than when the currency is cheaper.
It is better to observe the market and wait for a convenient moment. Similarly, it does not pay to overpay when we have the opportunity to invest money with some profit. This mainly applies to people overpaying every month. Overpaying is definitely a good idea when the loan has a high interest rate and there is no deposit on the market with a higher interest rate.
When it comes to foreign currency loans
Then it is much better to throw money into the loan. On the other hand, when it comes to foreign currency loans,
In the event of early repayment, it is important not to go overboard. You can’t throw your last savings into a loan to close it quickly. This is true, sometimes it works, but every man should have a so-called financial reserve, ie such savings that are impossible in everyday life, because they provide security for the proverbial rainy day.