After signing the contract, however, many borrowers are asking themselves whether it is possible to repay the debts earlier? And above all: is it worth it?
Poles are more and more willing to take all kinds of loans and credits. The most common reason is naturally temporary cash flow problems. Banking institutions and not only offer liabilities on attractive terms.
It often happens that we need cash “for now”. Urgent expenses, a bit of emotion and running time usually blur the picture of reality. Sometimes we borrow more than required by the situation, other times we will misjudge our potential income. After some time, it may turn out that instead of a 5-year loan period, we could have chosen a shorter term. Then the so-called overpayment of the loan comes to the rescue, i.e. in short: its early repayment.
According to the reports of the National Register of Debtors, the number of borrowers in Poland is increasing every year. Debt in various institutions from the financial sector already has more than 15 million of our countrymen who have signed less than 40 million contracts so far. We belong to one of the most indebted nations in Europe! Experts are sounding the alarm because the situation is getting worse regularly and the problem cannot be solved. We write more about this in the article titled Record Debt of Poles. It turns out that the average indebtedness of a Polish resident is over $ 40,000, and the total amount of liabilities is up to $ 580 billion.
Lack of knowledge and sensitivity
We should look for the reasons for this in the low economic awareness of our countrymen. Unfortunately, school programs do not provide subjects closely related to economic sciences. In Polish schools there are also no lessons on finance, learning how to manage their own budget, etc. Young Poles are not able to develop the habits of saving needed in the future. Numerous examples also show that more and more people disrespect hard-earned money. In the context of the lack of knowledge, one can cite the example that the majority of Poles surveyed do not distinguish between basic financial products, such as credit, debit or loan. For them we have prepared a text called Loan and loan – what are the differences.
You have to be able to borrow!
We live in a world ruled by money. Meanwhile, we know so little about our personal finances. For many of us, commitments made at banks or loan companies are a normal and inseparable part of everyday life. Today, we are building a house or buying an apartment on credit without thinking about whether we will be able to pay it back. We even borrow for consumption. According to statistical data, funds from loans are largely allocated to home appliances and electronics, including cell phones and laptops, as well as for current purchases. Before entering into a contract with the lender, it is worth analyzing your situation, as well as familiarize yourself with the 3 iron rules of informed lending.
Credit overpayment – in what situations?
Repayment of the loan every month strongly exceeds our home budget. In a situation where we have a larger sum set aside, we begin to wonder whether it would be wise to pay back the obligation earlier. Somewhere in the back of the head we feel that we could finally free ourselves from stress related to the load. Banking and loan companies that grant loans generally allow early payment. However, each case is different and it is worth checking the possibility in advance in the contract. You can also contact the bank’s customer service office.
Credit overpayment and good will of the institution
While most banks agree to early repayment, some may slightly complicate the whole process in financial terms. It may turn out that the institution allows overpayment of the loan only under certain conditions. One of the criteria is usually the period of time since the contract was signed. It happens that the borrower is not able to repay the liability earlier than, for example, only a few years after taking the loan. Due to the fact that the overpayment applies mainly to mortgage loans, granted even for several decades, this solution may prove to be of little benefit to the client. Earlier payment is not always good for consumers. It depends on the bank whether the overpayment of the mortgage and not only the total cost of the liability.
Mortgage overpayment – what to watch out for?
Experts emphasize that each case is considered individually. There is no general rule as to how the overpayment process looks like. Helpful tools in this regard may be Internet tools, which through simulation will calculate the profitability of this solution. Of course, the detailed parameters of our commitment will be needed. You should also know that the result is for illustration only and not binding. How to find such tools? You can enter the phrase “early loan repayment calculator” or “overpayment mortgage calculator” in the internet search engine. For many years, the deal has been gaining popularity among borrowers. For this reason, more and more accurate calculation methods are created, and many banking institutions introduce calculators on their website.
Let’s read the contract
Let’s remember that the most important document, if we are talking about a loan, is a contract with a bank. It determines all possibilities of overpaying the loan. If there are no provisions in it, simply speaking about such a solution or we do not understand their meaning, let’s consult the issue with the employee of the institution. You can visit the bank’s headquarters or call the customer service office. Many institutions also allow you to talk to an online consultant using chat. If we are not sure about something, we can use the help of a lawyer or adviser. There are many different phenomena and dependencies on the finance level, which is why a person who does not find himself in the realities of this industry may feel a bit lost.
Credit overpayment and costs
We have already mentioned that the overpayment of credit is not always financially good for the client. First of all, not all banks give the borrower the opportunity to repay the entire amount earlier. Very often, the consumer has to settle for regulating the double or triple installments. This only speeds up the repayment process, but does not finish it immediately, after making the transfer in the amount of the entire borrowed amount. In addition, each borrower must carefully analyze his situation in financial terms and compare it with any costs incurred as a result of overpayment.
Is it worth it?
It turns out that many banking institutions already in the contract reserve the option of early repayment, subject to additional costs. Usually these are fees for the unused loan period. If they are higher than all the commissions and the value of interest that we will incur as a result of paying the debts in the normal manner, we should not decide on an overpayment.