How it works for those who want to redeem a loan early depends on what type of loan it is that you have taken. Some pay more, for example, than others. We will therefore take up a little quick about the different types of loans and what applies. The types of loans we raise here are micro loans, private loans and mortgages.
Solve a micro loan
The most common thing is that a micro loan only has a maturity of 30 days, which means that it is no big idea to settle this loan early. But if you have a micro loan with a maturity longer than 30 days, it might be an idea to do so.
If you want to settle a micro loan early, this is something you can do without any problems. It should not cost you anything extra to pay back. Just contact the lender and tell them where and how to deposit the money.
Resolve a private loan
Private loans vary widely in terms of interest rates. The large private loans can often have a fairly good interest rate, which means that they are not the first thing to prioritize when repaying debts. However, the smaller private loans often have a fairly high interest rate, which makes these extra interesting to solve as the monthly cost can be severely affected.
A private loan is basically the same loan as a micro loan, which means that you can easily solve this without having to pay any extra fees. The important thing is that you settle the most expensive loans first if you have money over and have more than one loan.
Resolve a mortgage
For mortgage loans, there are often a few other rules when it comes to extra repayments. A mortgage with a variable interest rate / three-month interest rate can quite easily amortize extra at no cost to you. You just have to do the repayment when a three-month period is over and it is calm.
However, if you have a mortgage with a fixed interest rate, there are some other rules. You can always pay extra when you wish, but the risk is that an expense will be added. This expense is called interest rate compensation and is intended to reimburse the lender for the costs they will still incur for your loan during the term.
If you have a floating loan and want to settle it early, just ask the lender where the money should be deposited. If you have a secured loan, you first contact them and ask what the cost will be so that you can make a decision then. Keep in mind when it comes to mortgages, these are usually the lowest interest rate you can get, which means that other loans have a higher priority when it comes to repayments.
However, if you sell the property that is the collateral for the loan, this means that you have to redeem the loan. Either with money from the sale or with other money.