If consumers have to finance a purchase that is necessary for them and sometimes cannot be postponed, this generally does not pose a major problem – provided that they have a credit rating. The consumer pays off the loan with a payment that is specially tailored to his personal and economic circumstances At the last installment, the loan is then paid off in full.
It is not uncommon for the loan agreement to include an option that allows the borrower to make a higher repayment rate free of charge during the term.
Immediate loan repayment
However, what is not possible in the context or is very difficult because expensive is the possibility that consumers want to make immediate repayment of their loan. It is certainly understandable if borrowers have a certain amount of cash and then wants to use it to repay their liabilities. Ultimately, every borrower must know that an immediate repayment of the loan is only possible by paying a prepayment penalty.
The bank does not expect the borrower to pay off the loan early and plans the loan installments to be paid in the work process. However, if the customer strives for immediate repayment, the bank escapes the interest payments, for which the borrower then has to pay a prepayment penalty. The amount of this “penalty fee” depends primarily on the outstanding loan amount and the remaining term of the loan.
There are situations in which a borrower has no choice but to make immediate repayment of their loan. This is the case, for example, if the loan is financing a property that is sold during the ongoing fixed interest period. As a rule, the buyer of the property does not take over the ongoing real estate financing, but the existing loans are replaced by the purchase price.
The fact that the rate fixation phase
Also runs with the purchase rarely happens. And then the above-mentioned regulation applies with the prepayment penalty, which can sometimes turn out to be quite significant, especially with real estate financing with a loan amount of several thousand euros.
And in the worst case, the proceeds from the sale of the property are not enough to repay the loans, including the prepayment penalty that is then payable. As a result, the difference either has to be included in new real estate financing or has to be paid off using a “normal” consumer loan.
If you are actually thinking of repaying your loan debt as soon as possible when concluding a loan contract, you should rather arrange a short term with your bank instead of immediate repayment. This is naturally a little more difficult with real estate financing, but with consumer loans, consumers can save the early repayment penalty if they want to repay the loan quickly.