Early Repayment Penalties- What is it?
So you got your finances arranged, and you are planning to settle your personal loan soon before the payment term?
Then you need to think about it again.
Few lenders charge you for paying loan early. Hence, it is important to know the terms and conditions of your lenders before borrowing the loan.
Personal loans are one of the best options if you have an excellent credit score. If you are looking for any personal loan right now, then Ficc is the ideal choice for you; as it has got quite a few lenders who can help with you just what you want.Early repayment is usually made in order the save the interest.
Looking for the right payment term is fair, but overlooking the consequences of the early payment is not a good idea.
Early Repayment Penalties or the early redemption penalties are those charges that are charged when the loans are paid off early. Not all lenders have this rule. Hence, while choosing a lender for a Personal loan, it is important to go for a lender whose contract says “no early repayment penalties apply.”
The penalty varies from lender to lender. It may be a certain percentage of 6-8 months’ interest or just one or two months’ interest. The earlier you try to clear off your loan amount, the higher penalty, you will be charged. An early repayment penalty can add an enormous cost on your loan.
Why Early Repayment Penalty?
Few money lenders borrow money from the wholesale money markets at the fixed rates and then lend to the borrowers on variable interest rates. If a borrower is repaying the loan early, then those lenders will have to support the sum they borrowed from the market. This will cost them.
Hence you are charged Early Repayment Penalty by few lenders.
Choosing the loan package that has no Early Repayment Charge is one way to avoid this penalty. Another way is to wait until the ERC charge period ends.There is something called Penalty period, in which you will not be able to make the complete repayment in advance. Once the penalty period ends, you can repay your loan completely.