Your consideration for an installment loan is paying it back in time. But did you know that you can also repay such a loan in part or in full early? In both cases, a lender can charge you a ‘reinvestment fee’. This is actually a kind of fine; the lender loses interest. The most important advantage is that you do not have to repay the interest that is still open. Of course, the borrowed capital still has to be paid. There are different rules for a consumer credit (borrowing an amount in money for a personal purchase) than for a home loan. On the websites of the money providers you can calculate whether accelerated repayment is interesting for you.
If you want to pay off a consumer credit early, you must send a registered letter at least 10 days before your next repayment. If you do not do this, the lender can charge 10 days interest. The Belgian government has set a maximum reimbursement for consumer credit from 2010 onwards: for a repayment amount that is paid early in one go, the lender may charge a maximum of 1% as compensation if the contract runs for more than one year. If the term is less than one year, the maximum reimbursement is 0.5%. Any percentage, the maximum interest may never be more than if you do not repay early.
For loan amounts before 2010 you pay a reinvestment payment of 2 or 3 months interest (depending on the amount) on the outstanding amount. The reimbursement does not apply to a revolving credit (marked in red) or credit cards. It is better to pay more than the minimum in these cases so that you pay less interest. Because you always pay more interest on a debt than you receive when you save, it may be beneficial to repay the loan early. So read the contract carefully to know what the conditions are for an installment loan. You can already get an idea about the providers by comparing them. So take some time to find the cheapest.
You can also pay back quickly for a home loan.
Maybe you have money left over or you can get a better interest rate from another provider. Note that with another provider the interest is at least 1% lower and you still have to pay off a dozen years, otherwise it is not worth the costs. The bank usually charges you a reinvestment fee of 3 months interest on the amount still to be repaid – so not 3 times the monthly repayment amount. The bank also charges you file costs and the institution that refinances your credit will ask for ‘handing costs’ (a deed that ends your old mortgage) for financing a new installment loan. You can already get started by surfing to the websites of lenders. Most mortgage providers provide a free simulator. You can use this to see what an early payment will cost and make a decision that will save you the most money. So that’s nice in the pocket.