Early repayment of a loan is a statutory facility that allows the debtor to pay its debt in advance. It can be done in many ways.
Existing refund types
The type of prepayment depends, of course, on the loan agreement. The two main cases are:
For a credit for consumption: since 30 June 1989, it is possible to refund a consumer credit, even if the contract does not provide for it, the law has priority. For loans that were contracted before June 30, 1989, an early repayment may be made if a clause so provides. On the other hand, if this is not the case, the credit agency is free to refuse this method.
For a mortgage: In this case, it is possible to repay all or part of your loan provided you make a refund greater than 10% of the original amount borrowed. This rule does not apply in case of credit balance. Beware, however, most of these credit agreements provides penalties for early repayment.
Possible cases of early repayment
Depending on the situation of the borrower, he may want to anticipate the term of his loan in two ways:
Partial early repayment: Making a partial early repayment consists in repaying part of the outstanding capital. This makes it possible to reduce the amount of the monthly payment by preserving the initial duration or to reduce the number of months remaining to be refunded while retaining the initial monthly payment. By default, this operation will keep the amount of the deadline and decrease the remaining time. Some banks allow it for a fee. Partial prepayment changes the terms of the current credit.
Early repayment in full: This repayment method allows to pay in full a sum due before term. In the case of a revolving credit no compensation can be claimed.
Inherent costs of the operation
The amount of the penalties that may be requested by lenders is framed by the law on consumption credits. Thus, it can not be greater than one semester of interest rate on the repaid capital. It can not exceed 3% of the outstanding capital before the last payment.
The full or partial repayment of your credit requires a simulation beforehand to know if it is profitable or not. At Pre-Finance, we support you in this important decision. Our advisors are at your disposal to give you all the information to make the right decision.