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What happens if I want to repay my secured loan early?
A secured loan is a loan that is secured against your home, and is therefore only available to homeowners.
Many people take out secured loans for a variety of reasons, and in some cases people find themselves in a position to repay the loan early – this could be through any situation from a house move, where the loan has to be repaid from the equity if it cannot be transferred, to a windfall where the borrower chooses to repay the loan in full.
However, there are a number of things to remember when it comes to repaying your secured loan early:
- Depending on when you settle your loan you may be charged a redemption fee, which is usually a number of months' worth of interest
- Redemption penalties can vary depending on how long you have to run on the loan and how quickly after taking out the loan you decide to settle
- You should always read the small print with regards to early redemption when you take the loan out and before you decide whether to settle early
Paying off your secured loan
Secured loans are generally available over a period of up to twenty-five years, and many people take these loans out over a long period.
However, some people decide to pay off the loan early if the opportunity arises, and others decide to repay the loan and switch to another product from a different lender.
It is important to remember that with secured loans there is often an early redemption fee to pay, although this does depend on when you settle the loan.
There are a number of factors that can affect how much you will be charged for paying off your loan early. There is nothing to stop you from repaying your loan early, but you may be put off from doing this by the charges applied by the lender.
Penalties can be, for example, three or six months' worth of interest. Other factors that may affect the amount that you are charged include the term over which you took your loan and the amount of the loan.
Before you make a firm decision with regards to paying off your secured loan you should contact the lender and ask for a redemption figure in writing. This will enable you to see how much you will have to pay off in total including the redemption fee, which will have been added to the final balance.
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