Early repayment of a consumer loan
Early repayment of a consumer loan, Since, Russian banks has been required to provide
customers with the right to early repay loans without additional payments or commissions.
This allows the borrower to quickly close the debt or reduce the overpayment on the loan.
We talk about the features, types, and errors of early repayments.
APPLY FOR A LOAN
Is it possible to fully repay the loan before the end of its term?
The possibility of early repayment is specified in the loan agreement. To close the debt to the bank,
it is necessary to deposit the balance of the loan body and accrued interest into the account.
Early repayment of the loan reduces the financial burden by reducing the amount of interest:
you pay only for the time that you actually used the money.
The main condition is to notify the bank within the period established by the agreement
that you plan to close the loan ahead of schedule. The usual bank notification period is 30 business days.
Premature loan repayment without notice is possible if:
you took a non-purpose loan, from the date of issue of which no more than 14 days have passed;
you took a target loan, from the date of issue of which no more than 30 days have passed.
In both cases, together with the body of the loan, the borrower pays interest for the days of using the money.
In practice, not all banks require notification of the intention to close the loan or repay part of it.
If this does not contradict the terms of the agreement, the operation can be performed using remote services
or at the bank’s cash desk on the day of the request by filling out the required forms.
Is it possible to close only part of the loan ahead of schedule?
This possibility also exists.
This is called partial early repayment. Any amount can be accepted as partial early repayment unless restrictions are set by the bank.
Most credit organizations do not limit the amount that can be deposited into the account in excess of the usual contribution.
In case of partial early repayment, the bank is obliged to adjust the individual payment schedule and inform the client about it.
Depending on the conditions of your bank’s loan program, the adjustment can take place according to one of two parameters:
you can keep the loan term, but reduce the number
of monthly payments or vice versa, leave the payments at the same level, reducing the term.
What to consider when paying early
Commission for partial redemption is completely abolished. There are also no penalties for early closing of the loan.
Banks do not have the right to refuse the client’s intention to repay their debt ahead of schedule.
Therefore, if bank employees refuse to accept your application or interfere with you in some other way, ask to justify the actions in writing.
Such a document will later help you protect your rights.
The interest rate remains for the entire term of the agreement, even if part of the loan is repaid ahead of schedule.
In the case of loans received with state support, the use of subsidies,
housing certificates, or under concessional lending programs, early repayment also does not lead to an increase in the rate.
Raiffeisenbank provides customers with the opportunity to fully or partially close their loan with early repayments.
This can be done through the Raiffeisen Online mobile application or at a bank branch.
In case of early repayment through the application, interest is recalculated
and the monthly payment is reduced automatically on the next day after the funds are credited to the account.
Please note that in case of partial early repayment of the loan, the next monthly payment is not canceled.
When concluding a loan agreement, a schedule is established where the date of making the monthly payment is specified,
and if you pay the honor of funds not on this particular day, but before it,
be sure to check the balance to be paid in the current period. The Bank will charge an additional monthly payment,
including a part of the body of the debt and interest on it, taking into account the number of days
remaining from the date of early repayment to the date of the monthly payment.
This amount will differ from the regular monthly payment formed after the recalculation of the schedule,
taking into account partial early repayment: it is less since it is charged for an incomplete month.
What documents are needed?
The loan repayment procedure is simplified as much as possible, no additional documents are required for this.
To close the debt, you only need a bank card linked to a credit account or cash.
Early repayment of a loan is available at Raiffeisenbank through a mobile application and a personal account on the website,
the documents are already in the system, and you do not need to fill in their data.
When repaying debt through Raiffeisenbank’s online channels, there are no restrictions on the maximum amount of payment,
The possibility of early repayment is provided for consumers, auto loans, and mortgages.
How to calculate the approximate terms of early repayment?
To calculate what is more profitable – reducing the total term or the amount of the monthly payment,
you can use the early repayment loan calculator, which can be found on online platforms dedicated to finance.
Enter the amount and term of the loan, the date it was received, the amount and type of rate (it can be fixed or variable),
and the type of payment – annuity or differentiated. You will receive a
new schedule and a calculation of the total amount of overpayment for different debt repayment options.
Is it profitable to repay the loan ahead of schedule?
The borrower who repays the loan ahead of schedule receives:
Reducing the value of the acquired property. Both for consumer and targeted lending,
interest is charged on the balance of the amount under the contract during the period of using the money.
By paying part of the funds before the due date, in any case, you reduce the total overpayment.
Reducing the cost of additional services.
Some loan programs provide an opportunity to receive a discount from the base rate
when concluding a property or life and health insurance contract for the borrower.
Insurance may be valid for only a year or two, which means you will have to buy
it again to avoid changes in the terms of the loan agreement. Close the loan earlier – save on insurance.
Accelerated transfer of acquired property with borrowed funds to full disposal.
Having closed the loan, you can sell, donate, and exchange property without restrictions.
But there are also risks. For example,
frequent loans with their constant early repayment can negatively affect your credit rating,
For example, if you regularly take out a mortgage and repay it early in a short period,
the bank may see commercial intent in this and refuse to lend or offer less favorable terms.
But if this is your first loan, you do not plan to take out another mortgage in the next two or three years –
use the savings opportunities as you need.