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Can I repay an unsecured loan early?
The laws governing credit require any lender to allow you to repay your debt whenever you want.
However, many lenders will still charge an early repayment fee if you do repay your loan before the end of the loan term.
Where an early repayment penalty is charged – on unsecured loans it is usually around 1 month’s interest charges. There are also unsecured loans available that do not charge an early repayment fee at all – compare unsecured loans here.
Unsecured loan finance and repaying early
Although we all need to take out unsecured finance from time to time, most of us want to get out of debt as quickly as possible and therefore you may be looking at ways to clear your loan off as quickly as possible.
If this is the case there are a number of things that you should bear in mind with regards to repaying your loan. This includes:
- The shorter the period over which you take out the loan the quicker it will be cleared, but the more you will have to repay each month.
- You should make sure that you always make the minimum repayment on your loan by or on the specified date to avoid charges, which could keep you in debt for longer.
- You should check and see whether you can make larger repayments some months in order to speed up repayment.
- If you wish to repay the loan early make sure that there is no early redemption penalty charged.
Paying off your unsecured loan
Being in a position to pay off your unsecured loan early is great, as it means that you can get out of debt more quickly.
All sorts of unexpected circumstances can result in the ability to repay your loan early, such as a rise in income or an unexpected windfall.
However, before you rush into paying off your loan early you need to check and make sure that you will not be penalised for doing this through the application of an early redemption fee.
Early redemption fees are applied by some lenders when the consumer settles the loan before the specified loan end date. However, these fees are generally most costly on secured loans, and most unsecured lenders only charge around 1 month’s interest – and some do not charge an early repayment fee at all.
It is of course, better to be safe than sorry, so if you have an unsecured loan and you wish to repay the balance off early you need to check that there will be no fee applied.
You can do this through reading the terms and conditions that come when you take out the loan or by contacting the loan company directly.
Compare unsecured loans
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