When you buy a consumer credit, the goal is to fund an immediate need, whether essential or not. Whether it’s borrowing to go on a trip, getting married, doing work or buying a car, there are many reasons to take a credit.
But if you do not have the funds to carry out your projects today, nothing says that your situation will not change in a few months. If it evolves favorably, you may have the funds to repay your credit before the end of your term .
There are two types of prepayment of a consumer loan :
- full prepayment , which means that you repay all the outstanding principal.
- partial prepayment , which means that the borrower only reimburses a portion of the sums due. In this case, a cash inflow can make it possible to repay a part of your loan and thus lower the monthly payments or reduce the duration of the credit.
What are the advantages of prepayment?
Early repayment has several economic benefits :
- you avoid paying interest over a certain period;
- you increase your monthly budget and therefore your purchasing power ;
Lerves advice! If you plan to take out a home loan, the early repayment of your consumer credit can also be very beneficial . Indeed, your maximum debt ratio is legally limited to 33% of your income, the accumulation of several loans can cause this figure to explode and cause a refusal of home loan by your bank. This is why they sometimes ask borrowers to repay early their credit conso.
How to avoid the costs of a prepayment?
The repayment of an anticipated consumer credit constitutes a shortfall of most lending institutions on the interest rates charged to their customers . That is why they are relatively numerous to impose what they call prepayment penalties (PRA) or prepayment indemnities (IRA), to restrict the maximum initiatives.
These fees are set as soon as the loan is signed, and are strictly regulated by the Lagarde law.
In which case does the partial or total prepayment of a consumer loan lead to penalties?
If you want to settle your consumer credit and the outstanding capital is more than 10 000 dollars , you will have to pay a prepayment fee. However, rest assured, these fees are framed by law and can not exceed a certain limit. Thus, if you have more than twelve months of repayment, the penalties are limited to 1% of the amount of the credit, 0.5% if it remains less than one year.
However, nothing will prevent you from negotiating these rates down when you subscribe to your consumer credit.
In which cases is there no prepayment allowance?
If you repay your credit early while the outstanding capital is less than 10 000 dollars , you have a credit limit or the borrowing rate is not fixed, you will not have to pay a penalty prepayment.
Good to know : no compensation can be claimed in the case of a revolving credit which, by its very nature, does not lend itself to the principle of penalty. Indeed, it is a reserve of money that you take and pay when you want.
How to repay your credit advance conso?
You must send a registered letter with acknowledgment of receipt to your lending body to establish the conditions under which the prepayment of the loan will take place.
Lerves advice! Note that prepayment terms are among the criteria to consider when comparing consumer credit offers on a specialized site like Orlando.