Early repayments
Your rights if you want to pay your loan off early.
'Pre-payment'
You have the right to pay off the full amount of your credit contract at any time. This is called full pre-payment. You can also choose to make extra payments before they are due. The creditor has to accept these unless your credit contract specifically says that they don’t have to. But the creditor can choose to apply your extra payments when your regular payments are due.
Can the creditor charge a ‘break fee’ if I repay early?
If it is specifically included in your contract, the creditor can charge you:
- administrative costs relating to the early repayment, for example, the cost of preparing the paperwork and calculations
- a reasonable estimate of the creditor’s loss from you repaying early.
These costs must be reasonable. You can ask the creditor what costs you’ll have to pay if you repay your credit sale or credit contract early. They have to give you this information if you ask for it, but they may charge you a small fee.
Is it worth repaying early?
Before making a pre-payment, check that it is worth it. Compare the cost of repaying early with what you’ll save on interest, insurance and other costs. Ask a budget advisor to help you calculate this.
See the Federation of Family Budgeting Services website.
Can I get a rebate on unused insuance?
If you have paid for credit related insurance as part of your credit contract, the creditor must pay back the un-used part of the insurance premium you’ve paid. The amount you receive will be based on how early you’re repaying the balance – the later you repay, the smaller the rebate. This rebate must be deducted from the amount you have to pay to settle the credit
contract.
