Paying Off A Loan Early

The fact that a person’s financial status can change means that it is good to have a bit of flexibility in life. Most people aim to add flexibility with respect to things going wrong, for example, losing their job or suffering a fall in their wages. However, this isn’t always the case, and it may be that a person comes into money. This may provide them with the chance to pay off a loan or a financial agreement early, which will be of benefit.

In the United Kingdom, it is important to note that the Consumer Credit Act provides you with the right to pay off a loan early while obtaining a rebate of any interest and charges that have been paid on the loan. In order to obtain this rebate, you will have to write to the lending organisation and then request for an early settlement amount. This will be the amount that you need to pay in order to have the loan paid off in full and this figure should include a rebate.

As long as you request this information from the lender, they should tell you the full amount and provide you with 28 days to pay this loan off in full. The level of interest that has to be paid will depend on when the loan was taken out and how much of the loan has already been paid off. If you request the early settlement figure, you are not duty bound to pay the loan off early. You can receive this figure and then decide against paying off the loan, continuing with your standard payments on a monthly basis.

If you don’t get the response you are looking for, seek specialist help

If the lending company doesn’t comply with your request for a settlement amount or you believe that the settlement amount is too high, you should look to obtain advice from a financial specialist.

While some people are keen to pay off a loan early in full, it may be in the best interests of some people to pay off part of the loan early. This is referred to as a partial early settlement and paying off this amount of money will still entitle you to a rebate. It stands to reason that the amount you receive as a rebate will not be at the same level as you would expect when paying off the loan in full but it will still help you to save money.

You can lower the amount of money that you need to pay

You’ll also find that paying off some of the loan early will have an impact on how the rest of the loan is paid off. It may be that the terms and conditions of the loan agreement will provide guidelines as to what impact a partial loan payment will have on the remainder of the loan instalments. If there is no mention made of the impact, you may be able to enter negotiations with your current financial provider.

You may be able to reduce the amount of money that you pay each month or you may be able to pay back the remainder of the loan across a shorter period of time. Both of these outcomes will be of benefit and one may be more preferable to you than the others. If one of these aspects is more preferable to you, make sure you know which option is best for you and then push for this new agreement to be implemented.

If you are looking to take this action, you should inform the lender, verbally or in writing, that you want to pay off part of the loan and then make this payment within a 28 day period. Once the payment has been made, contact the lender to determine how much of the loan is outstanding and what impact this will have on the remainder of the money that is owed.

Anyone that attempts to take this course of action but find that they are already in arrears with their loan will usually find that a partial early payment will be utilised to pay off the arrears at first.

A guarantor loan is a good way to take control of your finances and if you obtain a favourable rate of APR, you may find that this is the best way to consolidate your debt and move forward financially.

Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.